FDIC Law, Regulations, Related Acts

8000 - Miscellaneous Statutes and Regulations

GOVERNMENT SECURITIES BROKERS AND DEALERS

SEC. 15C. (a)(1)(A) It shall be unlawful for any
government securities broker or government securities dealer (other
than a registered broker or dealer or a financial institution) to make
use of the mails or any means or instrumentality of interstate commerce
to effect any transaction in, or to induce or attempt to induce the
purchase or sale of, any government security unless such government
securities broker or government securities dealer is registered in
accordance with paragraph (2) of this subsection.

(B)(i) It shall be unlawful for any government securities broker
or government securities dealer that is a registered broker or dealer
or a financial institution to make use of the mails or any means or
instrumentality of interstate commerce to effect any transaction in, or
to induce or attempt to induce the purchase or sale of, any government
security unless such government securities broker or government
securities dealer has filed with the appropriate regulatory agency
written notice that it is a government securities broker or government
securities dealer. When such a government securities broker or
government securities dealer ceases to act as such it shall file with
the appropriate regulatory agency a written notice that it is no longer
acting as a government securities broker or government securities
dealer.

(ii) Such notices shall be in such form and contain such
information concerning a government securities broker or government
securities dealer that is a financial institution and any persons
associated with such government securities broker or government
securities dealer as the Board of Governors of the Federal Reserve
System shall, by rule, after consultation with each appropriate
regulatory agency (including the Commission), prescribe as necessary or
appropriate in the public interest or for the protection of investors.
Such notices shall be in such form and contain such information
concerning a government securities broker or government securities
dealer that is a registered broker or dealer and any persons associated
with such government securities broker or government securities dealer
as the Commission shall, by rule, prescribe as necessary or appropriate
in the public interest or for the protection of investors.

(iii) Each appropriate regulatory agency (other than the
Commission) shall make available to the Commission the notices which
have been filed with it under this subparagraph, and the Commission
shall maintain and make available to the public such notices and the
notices it receives under this subparagraph.

(2) A government securities broker or a government securities
dealer subject to the registration requirement of paragraph (1)(A) of
this subsection may be registered by filing with the Commission an
application for registration in such form and containing such
information and documents concerning such government securities broker
or government securities dealer and any persons associated with such
government securities broker or government securities dealer as the
Commission, by rule, may prescribe as necessary or appropriate in the
public interest or for the protection of investors. Within 45 days of
the date of filing of such application (or within such longer period as
to which the applicant consents), the Commission shall--

(A) by order grant registration, or

(B) institute proceedings to determine whether registration
should be denied. Such proceedings shall include notice of the grounds
for denial under consideration and opportunity for hearing and shall be
concluded within 120 days of the date of the filing of the application
for registration. At the conclusion of such proceedings, the
Commission, by order, shall grant or deny such registration. The
Commission may extend the time for the conclusion of such proceedings
for up to 90 days if it finds good cause for such extension and
publishes its reasons for so finding or for such longer period as to
which the applicant consents.

The Commission shall grant the registration of a government
securities broker or a government securities dealer if the Commission
finds that the requirements of this section are satisfied. The order
granting registration shall not be effective until such government
securities broker or government securities dealer has become a member
of a national securities exchange registered under section 6 of this
title, or a securities association registered under section 15A of this
title, unless the Commission has exempted such government securities
broker or government securities dealer, by rule or order, from such
membership. The Commission shall deny such registration if it does not
make such a finding or if it finds that if the applicant were so
registered, its registration would be subject to suspension or
revocation under subsection (c) of this section.

(3) Any provision of this title (other than
section 5 or paragraph (1) of
this subsection) which prohibits any act, practice, or course of
business if the mails or any means or instrumentality of interstate
commerce is used in connection therewith shall also prohibit any such
act, practice, or course of business by any government securities
broker or government securities dealer registered or having filed
notice under paragraph (1) of this subsection or any person acting on
behalf of such government securities broker or government securities
dealer, irrespective of any use of the mails or any means or
instrumentality of interstate commerce in connection therewith.

(4) No government securities broker or government securities
dealer that is required to register under paragraph (1)(A) and that is
not a member of the Securities Investor Protection Corporation shall
effect any transaction in any security in contravention of such rules
as the Commission shall prescribe pursuant to this subsection to assure
that its customers receive complete, accurate, and timely disclosure of
the inapplicability of Securities Investor Protection Corporation
coverage to their accounts.

(5) The Secretary of the Treasury (hereinafter in this section
referred to as the "Secretary"), by rule or order, upon the
Secretary's own motion or upon application, may conditionally or
unconditionally exempt any government securities broker or government
securities dealer, or class of government securities brokers or
government securities dealers, from any provision of subsection (a),
(b), or (d) of this section other than subsection (d)(3) or the rules
thereunder, if the Secretary finds that such exemption is consistent
with the public interest, the protection of investors, and the purposes
of this title.

(b)(1) The Secretary shall propose and adopt rules to effect the
purposes of this title with respect to transactions in government
securities effected by government securities brokers and government
securities dealers as follows:

(A) Such rules shall provide safeguards with respect to the
financial responsibility and related practices of government securities
brokers and government securities dealers including, but not limited
to, capital adequacy standards, the acceptance of custody and use of
customers' securities, the carrying and use of customers' deposits or
credit balances, and the transfer and control of government securities
subject to repurchase agreements and in similar transactions.

(B) Such rules shall require every government securities broker
and government securities dealer to make reports to and furnish copies
of records to the appropriate regulatory agency, and to file with the
appropriate regulatory agency, annually or more frequently, a balance
sheet and income statement certified by an independent public
accountant, prepared on a calendar or fiscal year basis, and such other
financial statements (which shall, as the Secretary specifies, be
certified) and information concerning its financial condition as
required by such rules.

(C) Such rules shall require records to be made and kept by
government securities brokers and government securities dealers and
shall specify the periods for which such records shall be preserved.

(2) RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS.--

(A) OBLIGATIONS TO OBTAIN, MAINTAIN, AND REPORT
INFORMATION.--Every person who is registered as a government
securities broker or government securities dealer under this section
shall obtain such information and make and keep such records as the
Secretary by rule prescribes concerning the registered person's
policies, procedures, or systems for monitoring and controlling
financial and operational risks to it resulting from the activities of
any of its associated persons, other than a natural person. Such
records shall describe, in the aggregate, each of the financial and
securities activities conducted by, and customary sources of capital
and funding of, those of its associated persons whose business
activities are reasonably likely to have a material impact on the
financial or operational condition of such registered person, including
its capital, its liquidity, or its ability to conduct or finance its
operations. The Secretary, by rule, may require summary reports of such
information to be filed with the registered person's appropriate
regulatory agency no more frequently than quarterly.

(B) AUTHORITY TO REQUIRE ADDITIONAL INFORMATION.--If, as
a result of adverse market conditions or based on reports provided
pursuant to subparagraph (A) of this paragraph or other available
information, the appropriate regulatory agency reasonably concludes
that it has concerns regarding the financial or operational condition
of any government securities broker or government securities dealer
registered under this section, such agency may require the registered
person to make reports concerning the financial and securities
activities of any of such person's associated persons, other than a
natural person, whose business activities are reasonably likely to have
a material impact on the financial or operational condition of such
registered person. The appropriate regulatory agency, in requiring
reports pursuant to this subparagraph, shall specify the information
required, the period for which it is required, the time and date on
which the information must be furnished, and whether the information is
to be furnished directly to the appropriate regulatory agency or to a
self-regulatory organization with primary responsibility for examining
the registered person's financial and operational condition.

(i) COOPERATION IN IMPLEMENTATION.--In developing and
implementing reporting requirements pursuant to subparagraph (A) of
this paragraph with respect to associated persons subject to
examination by or reporting requirements of a Federal banking agency,
the Secretary shall consult with and consider the views of each such
Federal banking agency. If a Federal banking agency comments in writing
on a proposed rule of the Secretary under this paragraph that has been
published for comment, the Secretary shall respond in writing to such
written comment before adopting the proposed rule. The Secretary shall,
at the request of a Federal banking agency, publish such comment and
response in the Federal Register at the time of publishing the adopted
rule.

(ii) USE OF BANKING AGENCY REPORTS.--A registered
government securities broker or government securities dealer shall be
in compliance with any recordkeeping or reporting requirement adopted
pursuant to subparagraph (A) of this paragraph concerning an associated
person that is subject to examination by or reporting requirements of a
Federal banking agency if such government securities broker or
government securities dealer utilizes for such recordkeeping or
reporting requirement copies of reports filed by the associated person
with the Federal banking agency pursuant to section 5211 of the Revised
Statutes, section 9 of the Federal Reserve Act,
section 7(a) of the Federal
Deposit Insurance Act, section 10(b) of the Home Owners' Loan Act, or
section 8 of the Bank Holding
Company Act of 1956. The Secretary may, however, by rule adopted
pursuant to subparagraph (A), require any registered government
securities broker or government securities dealer filing such reports
with the appropriate regulatory agency to obtain, maintain, or report
supplemental information if the Secretary makes an explicit finding,
based on information
provided by the
appropriate regulatory agency, that such supplemental information is
necessary to inform the appropriate regulatory agency regarding
potential risks to such government securities broker or government
securities dealer. Prior to requiring any such supplemental
information, the Secretary shall first request the Federal banking
agency to expand its reporting requirements to include such
information.

(iii) PROCEDURE FOR REQUIRING ADDITIONAL
INFORMATION.--Prior to making a request pursuant to subparagraph
(B) of this paragraph for information with respect to an associated
person that is subject to examination by or reporting requirements of a
Federal banking agency, the appropriate regulatory agency shall--

(I) notify such banking agency of the information required with
respect to such associated person; and

(II) consult with such agency to determine whether the
information required is available from such agency and for other
purposes, unless the appropriate regulatory agency determines that
any delay resulting from such consultation would be inconsistent with
ensuring the financial and operational condition of the government
securities broker or government securities dealer or the stability or
integrity of the securities markets.

(iv) EXCLUSION FOR EXAMINATION REPORTS.--Nothing in this
subparagraph shall be construed to permit the Secretary or an
appropriate regulatory agency to require any registered government
securities broker or government securities dealer to obtain, maintain,
or furnish any examination report of any Federal banking agency or any
supervisory recommendations or analysis contained therein.

(v) CONFIDENTIALITY OF INFORMATION PROVIDED.--No
information provided to or obtained by an appropriate regulatory agency
from any Federal banking agency pursuant to a request under clause
(iii) of this subparagraph regarding any associated person which is
subject to examination by or reporting requirements of a Federal
banking agency may be disclosed to any other person (other than a
self-regulatory organization), without the prior written approval of
the Federal banking agency. Nothing in this clause shall authorize the
Secretary or any appropriate regulatory agency to withhold information
from Congress, or prevent the Secretary or any appropriate regulatory
agency from complying with a request for information from any other
Federal department or agency requesting the information for purposes
within the scope of its jurisdiction, or complying with an order of a
court of the United States in an action brought by the United States or
the Commission.

(vi) NOTICE TO BANKING AGENCIES CONCERNING FINANCIAL AND
OPERATIONAL CONDITION CONCERNS.--The Secretary or appropriate
regulatory agency shall notify the Federal banking agency of any
concerns of the Secretary or the appropriate regulatory agency
regarding significant financial or operational risks resulting from the
activities of any government securities broker or government securities
dealer to any associated person thereof which is subject to examination
by or reporting requirements of the Federal banking agency.

(vii) DEFINITION.--For purposes of this subparagraph,
the term Federal banking agency' shall have the same meaning as the
term appropriate Federal banking agency' in section 3(q) of the
Federal Deposit Insurance Act (12
U.S.C. 1813(q)).

(D) EXEMPTIONS.--The Secretary by rule or order may
exempt any person or class of persons, under such terms and conditions
and for such periods as the Secretary shall provide in such rule or
order, from the provisions of this paragraph, and the rules thereunder.
In granting such exemptions, the Secretary shall consider, among other
factors--

(i) whether information of the type required under this paragraph
is available from a supervisory agency (as defined in section 1101(6)
of the Right to Financial Privacy Act of 1978
(12 U.S.C. 3401(6)), a State
insurance commission or similar State agency, the Commodity Futures
Trading Commission, or a similar foreign regulator;

(ii) the primary business of any associated person;

(iii) the nature and extent of domestic or foreign regulation of
the associated person's activities;

(iv) the nature and extent of the registered person's securities
transactions; and

(v) with respect to the registered person and its associated
persons, on a consolidated basis, the amount and proportion of assets
devoted to, and revenues derived from, activities in the United States
securities markets.

(E) CONFORMITY WITH REQUIREMENTS UNDER
SECTION 17(h).--In
exercising authority pursuant to subparagraph (A) of this paragraph
concerning information with respect to associated persons of government
securities brokers and government securities dealers who are also
associated persons of registered brokers or dealers reporting to the
Commission pursuant to section 17(h) of this title, the requirements
relating to such associated persons shall conform, to the greatest
extent practicable, to the requirements under section 17(h).

(F) AUTHORITY TO LIMIT DISCLOSURE OF
INFORMATION.--Notwithstanding any other provision of law, the
Secretary and any appropriate regulatory agency shall not be compelled
to disclose any information required to be reported under this
paragraph, or any information supplied to the Secretary or any
appropriate regulatory agency by any domestic or foreign regulatory
agency that relates to the financial or operational condition of any
associated person of a registered government securities broker or a
government securities dealer. Nothing in this paragraph shall authorize
the Secretary or any appropriate regulatory agency to withhold
information from Congress, or prevent the Secretary or any appropriate
regulatory agency from complying with a request for information from
any other Federal department or agency requesting the information for
purposes within the scope of its jurisdiction, or complying with an
order of a court of the United States in an action brought by the
United States or the Commission. For purposes of
section 552 of title 5, United
States Code, this paragraph shall be considered a statute described in
subsection (b)(3)(B) of such section 552.

(3)(A) With respect to any financial institution that has filed
notice as a government securities broker or government securities
dealer or that is required to file notice under subsection (a)(1)(B),
the appropriate regulatory agency for such government securities broker
or government securities dealer may issue such rules and regulations
with respect to transactions in government securities as may be
necessary to prevent fraudulent and manipulative acts and practices and
to promote just and equitable principles of trade. If the Secretary of
the Treasury determines, and notifies the appropriate regulatory
agency, that such rule or regulation, if implemented, would, or as
applied does (i) adversely affect the liquidity or efficiency of the
market for government securities; or (ii) impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of this section, the appropriate regulatory agency shall, prior to
adopting the proposed rule or regulation, find that such rule or
regulation is necessary and appropriate in furtherance of the purposes
of this section notwithstanding the Secretary's determination.

(B) The appropriate regulatory agency shall consult with and
consider the views of the Secretary prior to approving or amending a
rule or regulation under this paragraph, except where the appropriate
regulatory agency determines that an emergency exists requiring
expeditious and summary action and publishes its reasons therefor. If
the Secretary comments in writing to the appropriate regulatory agency
on a proposed rule or regulation that has been published for comment,
the appropriate regulatory agency shall respond in writing to such
written comment before approving the proposed rule or regulation.

(C) In promulgating rules under this section, the appropriate
regulatory agency shall consider the sufficiency and appropriateness of
then existing laws and rules applicable to government securities
brokers, government securities dealers, and persons associated with
government securities brokers and government securities dealers.

(4) Rules promulgated and orders issued under this section
shall--

(A) be designed to prevent fraudulent and manipulative acts and
practices and to protect the integrity, liquidity, and efficiency of
the market for government securities, investors, and the public
interest; and

(B) not be designed to permit unfair discrimination between
customers, issuers, government securities brokers, or government
securities dealers, or to impose any burden on competition not
necessary or appropriate in furtherance of the purposes of this title.

(5) In promulgating rules and issuing orders under this section,
the Secretary--

(A) may appropriately classify government securities brokers and
government securities dealers (taking into account relevant matters,
including types of business done, nature of securities other than
government securities purchased or sold, and character of business
organization) and persons associated with government securities brokers
and government securities dealers;

(B) may determine, to the extent consistent with paragraph (2) of
this subsection and with the public interest, the protection of
investors, and the purposes of this title, not to
apply, in whole
or in part, certain rules under this section, or to apply greater,
lesser, or different standards, to certain classes of government
securities brokers, government securities dealers, or persons
associated with government securities brokers or government securities
dealers;

(C) shall consider the sufficiency and appropriateness of then
existing laws and rules applicable to government securities brokers,
government securities dealers, and persons associated with government
securities brokers and government securities dealers; and

(D) shall consult with and consider the views of the Commission
and the Board of Governors of the Federal Reserve System, except where
the Secretary determines that an emergency exists requiring expeditious
or summary action and publishes its reasons for such determination.

(6) If the Commission or the Board of Governors of the Federal
Reserve System comments in writing on a proposed rule of the Secretary
that has been published for comment, the Secretary shall respond in
writing to such written comment before approving the proposed rule.

(7) No government securities broker or government securities
dealer shall make use of the mails or any means or instrumentality of
interstate commerce to effect any transaction in, or to induce or
attempt to induce the purchase or sale of, any government security in
contravention of any rule under this section.

(c)(1) With respect to any government securities broker or
government securities dealer registered or required to register under
subsection (a)(1)(A) of this section--

(A) The Commission, by order, shall censure, place limitations on
the activities, functions, or operations of, suspend for a period not
exceeding 12 months, or revoke the registration of such government
securities broker or government securities dealer, if it finds, on the
record after notice and opportunity for hearing, that such censure,
placing of limitations, suspension, or revocation is in the public
interest and that such government securities broker or government
securities dealer, or any person associated with such government
securities broker or government securities dealer (whether prior or
subsequent to becoming so associated), has committed or omitted any act
or omission enumerated in subparagraph (A), (D), (E), (H) or (G) of
paragraph (4) of section 15(b) of this title, has been convicted of any
offense specified in subparagraph (B) of such paragraph (4) within 10
years of the commencement of the proceedings under this paragraph, or
is enjoined from any action, conduct, or practice specified in
subparagraph (C) of such paragraph (4).

(B) Pending final determination whether registration of any
government securities broker or government securities dealer shall be
revoked, the Commission, by order, may suspend such registration, if
such suspension appears to the Commission, after notice and opportunity
for hearing, to be necessary or appropriate in the public interest or
for the protection of investors. Any registered government securities
broker or registered government securities dealer may, upon such terms
and conditions as the Commission may deem necessary in the public
interest or for the protection of investors, withdraw from registration
by filing a written notice of withdrawal with the Commission. If the
Commission finds that any registered government securities broker or
registered government securities dealer is no longer in existence or
has ceased to do business as a government securities broker or
government securities dealer, the Commission, by order, shall cancel
the registration of such government securities broker or government
securities dealer.

(C) The Commission, by order, shall censure or place limitations
on the activities or functions of any person who is, or at the time of
the alleged misconduct was, associated or seeking to become associated
government securities broker or government securities dealer registered
or required to register under subsection (a)(1)(A) of this section or
suspend for a period not exceeding 12 months or bar any such person
from being associated with such a government securities broker or
government securities dealer, if the Commission finds, on the record
after notice and opportunity for hearing, that such censure, placing of
limitations, suspension, or bar is in the public interest and that such
person has committed or omitted any act or is subject to an order of
finding enumerated in subparagraph (A), (D), (E), (H) or (G) of
paragraph (4) of section 15(b) of this title, has been convicted of any
offense specified in subparagraph (B) of such paragraph (4) within 10
years of the commencement of the proceedings under this paragraph, or
is enjoined from any action, conduct, or practice specified in
subparagraph (C) of such paragraph (4).

(2)(A) With respect to any government securities broker or
government securities dealer which is not registered or required to
register under subsection (a)(1)(A) of this section, the appropriate
regulatory agency for such government securities broker
or
government
securities dealer may, in the manner and for the reasons specified in
paragraph (1)(A) of this subsection, censure, place limitations on the
activities, functions, or operations of, suspend for a period not
exceeding 12 months, or bar from acting as a government securities
broker or government securities dealer any such government securities
broker or government securities dealer, and may sanction any person
associated, seeking to become associated, or, at the time of the
alleged misconduct, associated or seeking to become assiciated with
such government securities broker or government securities dealer in
the manner and for the reasons specified in paragraph (1)(C) of this
subsection.

(B) In addition, where applicable, such appropriate regulatory
agency may, in accordance with section 8 of the Federal Deposit
Insurance Act (12 U.S.C. 1818),
section 5 of the Home Owners' Loan Act of 1933
(12 U.S.C. 1464), or section 407
of the National Housing Act (12 U.S.C. 1730), enforce compliance by
such government securities broker or government securities dealer or
any person associated, seeking to become associated, or, at the time of
the alleged misconduct, associated or seeking to become associated with
such government securities broker or government securities dealer with
the provisions of this section and the rules thereunder.

(C) For purposes of subparagraph (B) of this paragraph, any
violation of any such provision shall constitute adequate basis for the
issuance of any order under section 8(b) or 8(c) of the Federal Deposit
Insurance Act, section 5(d)(2) or 5(d)(3) of the Home Owners' Loan Act
of 1933, or section 407(e) or 407(f) of the National Housing Act, and
the customers of any such government securities broker or government
securities dealer shall be deemed, respectively, "depositors" as
that term is used in section 8(c) of the Federal Deposit Insurance Act,
"savings account holders" as that term is used in section 5(d)(3)
of the Home Owners' Loan Act of 1933, or "insured members" as
that term is used in section 407(f) of the National Housing Act.

(D) Nothing in this paragraph shall be construed to affect in any
way the powers of such appropriate regulatory agency to proceed against
such government securities broker or government securities dealer under
any other provision of law.

(E) Each appropriate regulatory agency (other than the
Commission) shall promptly notify the Commission after it has imposed
any sanction under this paragraph on a government securities broker or
government securities dealer, or a person associated with a government
securities broker or government securities dealer, and the Commission
shall maintain, and make available to the public, a record of such
sanctions and any sanctions imposed by it under this subsection.

(3) It shall be unlawful for any person as to whom an order
entered pursuant to paragraph (1) or (2) of this subsection suspending
or barring him from being associated with a government securities
broker or government securities dealer is in effect willfully to
become, or to be, associated with a government securities broker or
government securities dealer without the consent of the appropriate
regulatory agency, and it shall be unlawful for any government
securities broker or government securities dealer to permit such a
person to become, or remain, a person associated with it without the
consent of the appropriate regulatory agency, if such government
securities broker or government securities dealer knew, or, in the
exercise of reasonable care should have known, of such order.

(d)(1) All records of a government securities broker or government
securities dealer are subject at any time, or from time to time, to
such reasonable periodic, special, or other examinations by
representatives of the appropriate regulatory agency for such
government securities broker or government securities dealer as such
appropriate regulatory agency deems necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of this title.

(2) Information received by an appropriate regulatory agency, the
Secretary, or the Commission from or with respect to any government
securities broker, government securities dealer, any person associated
with a government securities broker or government securities dealer, or
any other person subject to this section or rules promulgated
thereunder, may be made available by the Secretary or the recipient
agency to the Commission, the Secretary, the Department of Justice, the
Commodity Futures Trading Commission, any appropriate regulatory
agency, any self-regulatory organization, or any Federal Reserve Bank.

(3) GOVERNMENT SECURITIES TRADE RECONSTRUCTION.--

(A) FURNISHING RECORDS.--Every government securities
broker and government securities dealer shall furnish to the Commission
on request such records of government securities transactions,
including records of the date and time of execution of trades, as
the
Commission may
require to reconstruct trading in the course of a particular inquiry or
investigation being conducted by the Commission for enforcement or
surveillance purposes. In requiring information pursuant to this
paragraph, the Commission shall specify the information required, the
period for which it is required, the time and date on which the
information must be furnished, and whether the information is to be
furnished directly to the Commission, to the Federal Reserve Bank of
New York, or to an appropriate regulatory agency or self-regulatory
organization with responsibility for examining the government
securities broker or government securities dealer. The Commission may
require that such information be furnished in machine readable form
notwithstanding any limitation in subparagraph (B). In utilizing its
authority to require information in machine readable form, the
Commission shall minimize the burden such requirement may place on
small government securities brokers and dealers.

(B) LIMITATION; CONSTRUCTION.--The Commission shall not
utilize its authority under this paragraph to develop regular reporting
requirements, except that the Commission may require information to be
furnished under this paragraph as frequently as necessary for
particular inquiries or investigations for enforcement or surveillance
purposes. This paragraph shall not be construed as requiring, or as
authorizing the Commission to require, any government securities broker
or government securities dealer to obtain or maintain any information
for purposes of this paragraph which is not otherwise maintained by
such broker or dealer in accordance with any other provision of law or
usual and customary business practice. The Commission shall, where
feasible, avoid requiring any information to be furnished under this
paragraph that the Commission may obtain from the Federal Reserve Bank
of New York.

(C) PROCEDURES FOR REQUIRING INFORMATION.--At the time
the Commission requests any information pursuant to subparagraph (A)
with respect to any government securities broker or government
securities dealer for which the Commission is not the appropriate
regulatory agency, the Commission shall notify the appropriate
regulatory agency for such government securities broker or government
securities dealer and, upon request, furnish to the appropriate
regulatory agency any information supplied to the Commission.

(D) CONSULTATION.--Within 90 days after the date of
enactment of this paragraph, and annually thereafter, or upon the
request of any other appropriate regulatory agency, the Commission
shall consult with the other appropriate regulatory agencies to
determine the availability of records that may be required to be
furnished under this paragraph and, for those records available
directly from the other appropriate regulatory agencies, to develop a
procedure for furnishing such records expeditiously upon the
Commission's request.

(E) EXCLUSION FOR EXAMINATION REPORTS.--Nothing in this
paragraph shall be construed so as to permit the Commission to require
any government securities broker or government securities dealer to
obtain, maintain, or furnish any examination report of any appropriate
regulatory agency other than the Commission or any supervisory
recommendations or analysis contained in any such examination report.

(F) AUTHORITY TO LIMIT DISCLOSURE OF INFORMATION.--
Notwithstanding any other provision of law, the Commission and the
appropriate regulatory agencies shall not be compelled to disclose
any information required or obtained under this paragraph. Nothing in
this paragraph shall authorize the Commission or any appropriate
regulatory agency to withhold information from Congress, or prevent the
Commission or any appropriate regulatory agency from complying with a
request for information from any other Federal department or agency
requesting information for purposes within the scope of its
jurisdiction, or from complying with an order of a court of the United
States in an action brought by the United States, the Commission, or
the appropriate regulatory agency. For purposes of
section 552 of title 5, United
States Code, this subparagraph shall be considered a statute described
in subsection (b)(3)(B) of such section 552.

(e)(1) It shall be unlawful for any government securities
broker or government securities dealer registered or required to
register with the Commission under subsection (a)(1)(A) to effect any
transaction in, or induce or attempt to induce the purchase or sale of,
any
government
security, unless such government securities broker or government
securities dealer is a member of a national securities exchange
registered under section 6 of
this title or a securities association registered under section 15A of
this title.

(2) The Commission, after consultation with the
Secretary, by rule or order, as it deems consistent with the public
interest and the protection of investors, may conditionally or
unconditionally exempt from paragraph (1) of this subsection any
government securities broker or government securities dealer or class
of government securities brokers or government securities dealers
specified in such rule or order.

(f) LARGE POSITION REPORTING.--

(1) REPORTING REQUIREMENTS.--The Secretary may
adopt rules to require specified persons holding, maintaining, or
controlling large positions in to-be-issued or recently issued Treasury
securities to file such reports regarding such positions as the
Secretary determines to be necessary and appropriate for the purpose of
monitoring the impact in the Treasury securities market of
concentrations of positions in Treasury securities and for the purpose
of otherwise assisting the Commission in the enforcement of this title,
taking into account any impact of such rules on the efficiency and
liquidity of the Treasury securities market and the cost to taxpayers
of funding the Federal debt. Unless otherwise specified by the
Secretary, reports required under this subsection shall be filed with
the Federal Reserve Bank of New York, acting as agent for the
Secretary. Such reports shall, on a timely basis, be provided directly
to the Commission by the person with whom they are filed.

(2) RECORDKEEPING REQUIREMENTS.--Rules under
this subsection may require persons holding, maintaining, or
controlling large positions in Treasury securities to make and keep for
prescribed periods such records as the Secretary determines are
necessary or appropriate to ensure that such persons can comply with
reporting requirements under this subsection.

(3) AGGREGATION RULES.--Rules under this
subsection--

(A) may prescribe the manner in which positions and
accounts shall be aggregated for the purpose of this subsection,
including aggregation on the basis of common ownership or control; and

(B) may define which persons (individually or as a group) hold,
maintain, or control large positions.

(4) DEFINITIONAL AUTHORITY: DETERMINATION OF REPORTING
THRESHOLD.--

(A) In prescribing rules under this subsection, the Secretary
may, consistent with the purpose of this subsection, define terms used
in this subsection that are not otherwise defined in
section 3 of this title.

(B) Rules under this subsection shall specify--

(i) the minimum size of positions subject to reporting under this
subsection, which shall be no less than the size that provides the
potential for manipulation or control of the supply or price, or the
cost of financing arrangements, of an issue or the portion thereof that
is available for trading;

(ii) the types of positions (which may include financing
arrangements) to be reported;

(iii) the securities to be covered; and

(iv) the form and manner in which reports shall be transmitted,
which may include transmission in machine readable form.

(5) EXEMPTIONS.--Consistent with the public interest and
the protection of investors, the Secretary by rule or order may exempt
in whole or in part, conditionally or unconditionally, any person or
class of persons, or any transaction or class of transactions, from the
requirements of this subsection.

(6) LIMITATION ON DISCLOSURE OF
INFORMATION.--Notwithstanding any other provision of law, the
Secretary and the Commission shall not be compelled to disclose any
information required to be kept or reported under this subsection.
Nothing in this subsection shall authorize the Secretary or the
Commission to withhold information from Congress, or prevent the
Secretary or the Commission from complying with a request for
information from any other Federal department or agency requesting
information for purposes within the scope of its jurisdiction, or from
complying with an order of a court of the United States in an action
brought by the United States, the Secretary, or the Commission. For
purposes of section 552 of title 5, United States Code, this paragraph
shall be considered a statute described in subsection (b)(3)(B) of such
section 552.

(g)(1) Nothing in this section except paragraph (2) of this
subsection shall be construed to impair or limit the authority under
any other provision of law of the Commission, the Secretary of the
Treasury, the Board of Governors of the Federal Reserve System, the
Comptroller of the Currency, the Federal Deposit Insurance Corporation,
the Secretary of Housing and Urban Development, and the Government
National Mortgage Association.

(2) Notwithstanding any other provision of this title, the
Commission shall not have any authority to make investigations of,
require the filing of a statement by, or take any other action under
this title against a government securities broker or government
securities dealer, or any person associated with a government
securities broker or government securities dealer, for any violation or
threatened violation of the provisions of this section, other than
subsection (d)(3) or the rules or regulations thereunder, unless the
Commission is the appropriate regulatory agency for such government
securities broker or government securities dealer. Nothing in the
preceding sentence shall be construed to limit the authority of the
Commission with respect to violations or threatened violations of any
provision of this title other than this section (except subsection
(d)(3)), the rules or regulations under any such other provision, or
investigations pursuant to section
21(a)(2) of this title to assist a foreign securities
authority.

(h) EMERGENCY AUTHORITY.--The Secretary may, by order,
take any action with respect to a matter or action subject to
regulation by the Secretary under this section, or the rules of the
Secretary under this section, involving a government security or a
market therein (or significant portion or segment of that market), that
the Commission may take under section 12(k)(2) with respect to
transactions in securities (other than exempted securities) or a market
therein (or significant portion or segment of that market).

[Codified to 15 U.S.C. 78o--5]

[Source: Section 101 of title I of the Act of October 28,
1986 (Pub. L. No. 99--571; 100 Stat. 3208), effective July 25, 1987, as
amended by section 801(a) of title VIII of the Act of December 4, 1987
(Pub. L. No. 100--181; 101 Stat. 1265), effective December 4, 1987;
section 744(u)(3) of title VII of the Act of August 9, 1989 (Pub. L.
No. 101--73; 103 Stat. 441), effective August 9, 1989; section 4 of the
Act of October 16, 1990 (Pub. L. No. 101--432; 104 Stat. 970),
effective October 16, 1990; section 203(c)(1) of title II of the Act of
November 15, 1990 (Pub. L. 101--550; 104 Stat. 2718), effective
November 15, 1990; sections 102, 103(b), 104, 106(a), 108, and
109(b)(1) of title I of the Act of December 17, 1993 (Pub. L. No.
103--202; 107 Stat. 2345, 2346, 2347, 2349, 2351, 2352, respectively),
effective December 7, 1993; section 301(b)(10) of title III of the Act
of November 3, 1998 (Pub. L. No. 105--353; 112 Stat. 3236), effective
November 3, 1998; section 604(c)(1)(B) of title VI of the Act of July
30, 2002 (Pub. L. No. 107--204; 116 Stat. 796), effective July 30,
2002; section 7803(d) of title VII of the Act of December 17, 2004
(Pub. L. No. 108--458; 118 Stat. 3863), effective December 17, 2004;
section 376(3) of title III of the Act of July 21, 2010 (Pub. L. No.
111--203; 124 Stat. 1569), effective July 21, 2010; sections 929F(b)
and 985(b)(6) of title VI of the Act of July 21, 2010 (Pub. L. No.
111--203; 124 Stat. 1934), effective July 21, 2010]

SEC. 15D. SECURITIES ANALYSTS AND RESEARCH REPORTS.

(a) ANALYST PROTECTIONS.--The Commission, or upon the
authorization and direction of the Commission, a registered securities
association or national securities exchange, shall have adopted, not
later than 1 year after the date of enactment of this section, rules
reasonably designed to address conflicts of interest that can arise
when securities analysts recommend equity securities in research
reports and public appearances, in order to improve the objectivity of
research and provide investors with more useful and reliable
information, including rules designed--

(1) to foster greater public confidence in securities research,
and to protect the objectivity and independence of securities analysts,
by--

(A) restricting the prepublication clearance or approval of
research reports by persons employed by the broker or dealer who are
engaged in investment banking activities, or persons not directly
responsible for investment research, other than legal or compliance
staff;

(B) limiting the supervision and compensatory evaluation of
securities analysts to officials employed by the broker or dealer who
are not engaged in investment banking activities; and

(C) requiring that a broker or dealer and persons employed by a
broker or dealer who are involved with investment banking activities
may not, directly or indirectly, retaliate against or threaten to
retaliate against any securities analyst employed by that broker or
dealer or its affiliates as a result of an adverse, negative, or
otherwise unfavorable research report that may adversely affect the
present or prospective investment banking relationship of the broker or
dealer with the issuer that is the subject of the research report,
except that such rules may not limit the authority of a broker or
dealer to discipline a securities analyst for causes other than such
research report in accordance with the policies and procedures of the
firm;

(2) to define periods during which brokers or dealers who have
participated, or are to participate, in a public offering of securities
as underwriters or dealers should not publish or otherwise distribute
research reports relating to such securities or to the issuer of such
securities;

(3) to establish structural and institutional safeguards within
registered brokers or dealers to assure that securities analysts are
separated by appropriate informational partitions within the firm from
the review, pressure, or oversight of those whose involvement in
investment banking activities might potentially bias their judgment or
supervision; and

(4) to address such other issues as the Commission, or such
association or exchange determines appropriate.

(b) DISCLOSURE.--The Commission, or upon the authorization
and direction of the Commission, a registered securities association or
national securities exchange, shall have adopted, not later than 1 year
after the date of enactment of this section, rules reasonably designed
to require each securities analyst to disclose in public appearances,
and each registered broker or dealer to disclose in each research
report, as applicable, conflicts of interest that are known or should
have been known by the securities analyst or the broker or dealer, to
exist at the time of the appearance or the date of distribution of the
report, including--

(1) the extent to which the securities analyst has debt or equity
investments in the issuer that is the subject of the appearance or
research report;

(2) whether any compensation has been received by the registered
broker or dealer, or any affiliate thereof, including the securities
analyst, from the issuer that is the subject of the appearance or
research report, subject to such exemptions as the Commission may
determine appropriate and necessary to prevent disclosure by virtue of
this paragraph of material non-public information regarding specific
potential future investment banking transactions of such issuer, as is
appropriate in the public interest and consistent with the protection
of investors;

(3) whether an issuer, the securities of which are recommended in
the appearance or research report, currently is, or during the 1--year
period preceding the date of the appearance or date of distribution of
the report has been, a client of the registered broker or dealer, and
if so, stating the types of services provided to the issuer;

(4) whether the securities analyst received compensation with
respect to a research report, based upon (among any other factors) the
investment banking revenues (either generally or specifically earned
from the issuer being analyzed) of the registered broker or dealer; and

(5) such other disclosures of conflicts of interest that are
material to investors, research analysts, or the broker or dealer as
the Commission, or such association or exchange, determines
appropriate.

(c) LIMITATION.--Notwithstanding subsection (a) or any
other provision of law, neither the Commission nor any national
securities association registered under section 15A may adopt or
maintain any rule or regulation in connection with an initial public
offering of the common equity of an emerging growth company--

(1) restricting, based on functional role, which associated
persons of a broker, dealer, or member of a national securities
association, may arrange for communications between a securities
analyst and a potential investor; or

(2) restricting a securities analyst from participating in any
communications with the management of an emerging growth company that
is also attended by any other associated person of a broker, dealer, or
member of a national securities association whose functional role is
other than as a securities analyst.

(d) DEFINITIONS.--In this section--

(1) the term "securities analyst" means any associated
person of a registered broker or dealer that is principally responsible
for, and any associated person who reports directly or indirectly to a
securities analyst in connection with, the preparation of the substance
of a research report, whether or not any such person has the job title
of "securities analyst"; and

(2) the term "research report" means a written or
electronic communication that includes an analysis of equity securities
of individual companies or industries, and that provides information
reasonably sufficient upon which to base an investment decision.

[Codified to 15 U.S.C. 78o--6]

[Source: Section 501(a) of title V of the Act of July 30,
2002 (Pub. L. No. 107--204; 116 Stat. 791), effective July 30, 2002;
section 105(b) of title I of the Act of April 5, 2012 (Pub. L. No.
112--106; 125 Stat. 311), effective April 5, 2012]

(d) POST OFFERING COMMUNICATIONS.--Neither the
Commission nor any national securities association registered under
section 15A of the Securities Exchange Act of 1934 may adopt or
maintain any rule or regulation prohibiting any broker, dealer, or
member of a national securities association from publishing or
distributing any research report or making a public appearance, with
respect to the securities of an emerging growth company, either--

(1) within any prescribed period of time following the initial
public offering date of the emerging growth company; or

(2) within any prescribed period of time prior to the expiration
date of any agreement between the broker, dealer, or member of a
national securities association and the emerging growth company or its
shareholders that restricts or prohibits the sale of securities held by
the emerging growth company or its shareholders after the initial
public offering date.

(A) IN GENERAL.--A credit rating agency that elects to
be treated as a nationally recognized statistical rating organization
for purposes of this title (in this section referred to as the
applicant'), shall furnish to the Commission an application for
registration, in such form as the Commission shall require, by rule or
regulation issued in accordance with subsection (n), and containing the
information described in subparagraph (B).

(ii) the procedures and methodologies that the applicant uses in
determining credit ratings;

(iii) policies or procedures adopted and implemented by the
applicant to prevent the misuse, in violation of this title (or the
rules and regulations hereunder), of material, nonpublic information;

(iv) the organizational structure of the applicant;

(v) whether or not the applicant has in effect a code of ethics,
and if not, the reasons therefor;

(vi) any conflict of interest relating to the issuance of credit
ratings by the applicant;

(vii) the categories described in any of clauses (i) through (v)
of section 3(a)(62)(B) with respect to which the applicant intends to
apply for registration under this section;

(viii) on a confidential basis, a list of the 20 largest issuers
and subscribers that use the credit rating services of the applicant,
by amount of net revenues received therefrom in the fiscal year
immediately preceding the date of submission of the application;

(ix) on a confidential basis, as to each applicable category of
obligor described in any of clauses (i) through (v) of section
3(a)(62)(B), written certifications described in subparagraph (C),
except as provided in subparagraph (D); and

(x) any other information and documents concerning the applicant
and any person associated with such applicant as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the protection of investors.

(i) shall be provided from not fewer than 10 qualified
institutional buyers, none of which is affiliated with the applicant;

(ii) may address more than one category of obligors described in
any of clauses (i) through (v) of section 3(a)(62)(B);

(iii) shall include not fewer than 2 certifications for each such
category of obligor; and

(iv) shall state that the qualified institutional buyer--

(I) meets the definition of a qualified institutional buyer under
section 3(a)(64); and

(II) has used the credit ratings of the applicant for at least
the 3 years immediately preceding the date of the certification in the
subject category or categories of obligors.

(D) EXEMPTION FROM CERTIFICATION REQUIREMENT.--A written
certification under subparagraph (B)(ix) is not required with respect
to any credit rating agency which has received, or been the subject of,
a no-action letter from the staff of the Commission prior to August 2,
2006, stating that such staff would not recommend enforcement action
against any broker or dealer that considers credit ratings issued by
such credit rating agency to be ratings from a nationally recognized
statistical rating organization.

(E) LIMITATION ON LIABILITY OF QUALIFIED INSTITUTIONAL
BUYERS.--No qualified institutional buyer shall be liable in any
private right of action for any opinion or statement expressed in a
certification made pursuant to subparagraph (B)(ix).

(2) REVIEW OF APPLICATION.--

(A) INITIAL DETERMINATION.--Not later than 90 days after
the date on which the application for registration is furnished to the
Commission under paragraph (1) (or within such longer period as to
which the applicant consents) the Commission shall--

(i) by order, grant such registration for ratings in the subject
category or categories of obligors, as described in clauses (i) through
(v) of section 3(a)(62)(B); or

(ii) institute proceedings to determine whether registration
should be denied.

(B) CONDUCT OF PROCEEDINGS.--

(i) CONTENT.--Proceedings referred to in subparagraph
(A)(ii) shall--

(I) include notice of the grounds for denial under consideration
and an opportunity for hearing; and

(II) be concluded not later than 120 days after the date on which
the application for registration is furnished to the Commission under
paragraph (1).

(ii) DETERMINATION.--At the conclusion of such
proceedings, the Commission, by order, shall grant or deny such
application for registration.

(iii) EXTENSION AUTHORIZED.--The Commission may extend
the time for conclusion of such proceedings for not longer than 90
days, if it finds good cause for such extension and publishes its
reasons for so finding, or for such longer period as to which the
applicant consents.

(I) the applicant does not have adequate financial and managerial
resources to consistently produce credit ratings with integrity and to
materially comply with the procedures and methodologies disclosed under
paragraph (1)(B) and with subsections (g), (h), (i), and (j); or

(II) if the applicant were so registered, its registration would
be subject to suspension or revocation under subsection (d).

(3) PUBLIC AVAILABILITY OF INFORMATION.--Subject to
section 24, the Commission shall, by rule, require a nationally
recognized statistical rating organization, upon the granting of
registration under this section, to make the information and documents
submitted to the Commission in its completed application for
registration, or in any amendment submitted under paragraph (1) or (2)
of subsection (b), publicly available on its website, or through
another comparable, readily accessible means, except as provided in
clauses (viii) and (ix) of paragraph (1)(B).

(b) UPDATE OF REGISTRATION.--

(1) UPDATE.--Each nationally recognized statistical
rating organization shall promptly amend its application for
registration under this section if any information or document provided
therein becomes materially inaccurate, except that a nationally
recognized statistical rating organization is not required to amend--

(A) the information required to be filed under subsection
(a)(1)(B)(i) by filing information under this paragraph, but shall
amend such information in the annual submission of the organization
under paragraph (2) of this subsection; or

(B) the certifications required to be provided under subsection
(a)(1)(B)(ix) by filing information under this paragraph.

(2) CERTIFICATION.--Not later than 90 days after the end
of each calendar year, each nationally recognized statistical rating
organization shall file with the Commission an amendment to its
registration, in such form as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the protection
of investors--

(A) certifying that the information and documents in the
application for registration of such nationally recognized statistical
rating organization (other than the certifications required under
subsection (a)(1)(B)(ix)) continue to be accurate; and

(B) listing any material change that occurred to such information
or documents during the previous calendar year.

(c) ACCOUNTABILITY FOR RATINGS PROCEDURES.--

(1) AUTHORITY.--The Commission shall have exclusive
authority to enforce the provisions of this section in accordance with
this title with respect to any nationally recognized statistical rating
organization, if such nationally recognized statistical rating
organization issues credit ratings in material contravention of those
procedures relating to such nationally recognized statistical rating
organization, including procedures relating to the prevention of misuse
of nonpublic information and conflicts of interest, that such
nationally recognized statistical rating organization--

(A) includes in its application for registration under subsection
(a)(1)(B)(ii); or

(B) makes and disseminates in reports pursuant to section 17(a)
or the rules and regulations thereunder.

(2) LIMITATION.--The rules and regulations that the
Commission may prescribe pursuant to this title, as they apply to
nationally recognized statistical rating organizations, shall be
narrowly tailored to meet the requirements of this title applicable to
nationally recognized statistical rating organizations. Notwithstanding
any other provision of this section, or any other provision of law,
neither the Commission nor any State (or political subdivision thereof)
may regulate the substance of credit ratings or the procedures and
methodologies by which any nationally recognized statistical rating
organization determines credit ratings. Nothing in this paragraph may
be construed to afford a defense against any action or proceeding
brought by the Commission to enforce the antifraud provisions of the
securities laws.

(A) IN GENERAL.--Each nationally recognized statistical
rating organization shall establish, maintain, enforce, and document an
effective internal control structure governing the implementation of
and adherence to policies, procedures, and methodologies for
determining credit ratings, taking into consideration such factors as
the Commission may prescribe, by rule.

(i) a description of the responsibility of the management of the
nationally recognized statistical rating organization in establishing
and maintaining an effective internal control structure under
subparagraph (A);

(ii) an assessment of the effectiveness of the internal control
structure of the nationally recognized statistical rating organization;
and

(iii) the attestation of the chief executive officer, or
equivalent individual, of the nationally recognized statistical rating
organization.

(d) CENSURE, DENIAL, OR SUSPENSION OF REGISTRATION; NOTICE AND
HEARING.--

(1) IN GENERAL.--The Commission, by order, shall
censure, place limitations on the activities, functions, or operations
of, suspend for a period not exceeding 12 months, or revoke the
registration of any nationally recognized statistical rating
organization, or with respect to any person who is associated with, who
is seeking to become associated with, or, at the time of the alleged
misconduct, who was associated or was seeking to become associated with
a nationally recognized statistical rating organization, the
Commission, by order, shall censure, place limitations on the
activities or functions of such person, suspend for a period not
exceeding 1 year, or bar such person from being associated with a
nationally recognized statistical rating organization, if the
Commission finds, on the record after notice and opportunity for
hearing, that such censure, placing of limitations, suspension, bar or
revocation is necessary for the protection of investors and in the
public interest and that such nationally recognized statistical rating
organization, or any person associated with such an organization,
whether prior to or subsequent to becoming so associated--

(A) has committed or omitted any act, or is subject to an order
or finding, enumerated in subparagraph (A), (D), (E), (H), or (G) of
section 15(b)(4), has been convicted of any offense specified in
section 15(b)(4)(B), or is enjoined from any action, conduct, or
practice specified in subparagraph (C) of section 15(b)(4), during the
10-year
period preceding
the date of commencement of the proceedings under this subsection, or
at any time thereafter;

(B) has been convicted during the 10-year period preceding the
date on which an application for registration is filed with the
Commission under this section, or at any time thereafter, of--

(i) any crime that is punishable by imprisonment for 1 or more
years, and that is not described in section 15(b)(4)(B); or

(ii) a substantially equivalent crime by a foreign court of
competent jurisdiction;

(C) is subject to any order of the Commission barring or
suspending the right of the person to be associated with a nationally
recognized statistical rating organization;

(D) fails to file the certifications required under subsection
(b)(2);

(F) has failed reasonably to supervise, with a view to preventing
a violation of the securities laws, an individual who commits such a
violation, if the individual is subject to the supervision of that
person.

(2) SUSPENSION OR REVOCATION FOR PARTICULAR CLASS OR
SECURITIES.--

(A) IN GENERAL.--The Commission may temporarily suspend
or permanently revoke the registration of a nationally recognized
statistical rating organization with respect to a particular class or
subclass of securities, if the Commission finds, on the record after
notice and opportunity for hearing, that the nationally recognized
statistical rating organization does not have adequate financial and
managerial resources to consistently produce credit ratings with
integrity.

(B) CONSIDERATIONS.--In making any determination under
subparagraph (A), the Commission shall consider--

(i) whether the nationally recognized statistical rating
organization has failed over a sustained period of time, as determined
by the Commission, to produce ratings that are accurate for that class
or subclass of securities; and

(ii) such other factors as the Commission may determine.

(e) TERMINATION OF REGISTRATION.--

(1) VOLUNTARY WITHDRAWAL.--A nationally recognized
statistical rating organization may, upon such terms and conditions as
the Commission may establish as necessary in the public interest or for
the protection of investors, withdraw from registration by furnishing a
written notice of withdrawal to the Commission.

(2) COMMISSION AUTHORITY.--In addition to any other
authority of the Commission under this title, if the Commission finds
that a nationally recognized statistical rating organization is no
longer in existence or has ceased to do business as a credit rating
agency, the Commission, by order, shall cancel the registration under
this section of such nationally recognized statistical rating
organization.

(f) REPRESENTATIONS.--

(1) BAN ON REPRESENTATIONS OF SPONSORSHIP BY UNITED STATES
OR AGENCY THEREOF.--It shall be unlawful for any nationally
recognized statistical rating organization to represent or imply in any
manner whatsoever that such nationally recognized statistical rating
organization has been designated, sponsored, recommended, or approved,
or that the abilities or qualifications thereof have in any respect
been passed upon, by the United States or any agency, officer, or
employee thereof.

(2) BAN ON REPRESENTATION AS NRSRO OF UNREGISTERED CREDIT
RATING AGENCIES.--It shall be unlawful for any credit rating agency
that is not registered under this section as a nationally recognized
statistical rating organization to state that such credit rating agency
is a nationally recognized statistical rating organization registered
under this title.

(3) STATEMENT OF REGISTRATION UNDER SECURITIES EXCHANGE ACT
OF 1934 PROVISIONS.--No provision of paragraph (1) shall be
construed to prohibit a statement that a nationally recognized
statistical rating organization is a nationally recognized statistical
rating organization under this title, if such statement is true in fact
and if the effect of such registration is not misrepresented.

(g) PREVENTION OF MISUSE OF NONPUBLIC
INFORMATION.--

(1) ORGANIZATION POLICIES AND PROCEDURES.--Each
nationally recognized statistical rating organization shall establish,
maintain, and enforce written policies and procedures reasonably
designed, taking into consideration the nature of the business of such
nationally recognized statistical rating organization, to prevent the
misuse in violation of this title, or the rules or regulations
hereunder, of material, nonpublic information by such nationally
recognized statistical rating organization or any person associated
with such nationally recognized statistical rating organization.

(2) COMMISSION AUTHORITY.--The Commission shall issue
final rules in accordance with subsection (n) to require specific
policies or procedures that are reasonably designed to prevent misuse
in violation of this title (or the rules or regulations hereunder) of
material, nonpublic information.

(h) MANAGEMENT OF CONFLICTS OF INTEREST.--

(1) ORGANIZATION POLICIES AND PROCEDURES.--Each
nationally recognized statistical rating organization shall establish,
maintain, and enforce written policies and procedures reasonably
designed, taking into consideration the nature of the business of such
nationally recognized statistical rating organization and affiliated
persons and affiliated companies thereof, to address and manage any
conflicts of interest that can arise from such business.

(2) COMMISSION AUTHORITY.--The Commission shall issue
final rules in accordance with subsection (n) to prohibit, or require
the management and disclosure of, any conflicts of interest relating to
the issuance of credit ratings by a nationally recognized statistical
rating organization, including, without limitation, conflicts of
interest relating to--

(A) the manner in which a nationally recognized statistical
rating organization is compensated by the obligor, or any affiliate of
the obligor, for issuing credit ratings or providing related services;

(B) the provision of consulting, advisory, or other services by a
nationally recognized statistical rating organization, or any person
associated with such nationally recognized statistical rating
organization, to the obligor, or any affiliate of the obligor;

(C) business relationships, ownership interests, or any other
financial or personal interests between a nationally recognized
statistical rating organization, or any person associated with such
nationally recognized statistical rating organization, and the obligor,
or any affiliate of the obligor;

(D) any affiliation of a nationally recognized statistical rating
organization, or any person associated with such nationally recognized
statistical rating organization, with any person that underwrites the
securities or money market instruments that are the subject of a credit
rating; and

(E) any other potential conflict of interest, as the Commission
deems necessary or appropriate in the public interest or for the
protection of investors.

(3) SEPARATION OF RATINGS FROM SALES AND MARKETING.--

(A) RULES REQUIRED.--The Commission shall issue rules to
prevent the sales and marketing considerations of a nationally
recognized statistical rating organization from influencing the
production of ratings by the nationally recognized statistical rating
organization.

(i) exceptions for small nationally recognized statistical rating
organizations with respect to which the Commission determines that the
separation of the production of ratings and sales and marketing
activities is not appropriate; and

(ii) suspension or revocation of the registration of a nationally
recognized statistical rating organization, if the Commission finds, on
the record, after notice and opportunity for a hearing, that--

(I) the nationally recognized statistical rating organization has
committed a violation of a rule issued under this subsection; and

(II) the violation of a rule issued under this subsection
affected a rating.

(4) LOOK-BACK REQUIREMENT.--

(A) REVIEW BY THE NATIONALLY RECOGNIZED STATISTICAL RATING
ORGANIZATION.--Each nationally recognized statistical rating
organization shall establish, maintain, and enforce policies and
procedures reasonably designed to ensure that, in any case
in
which an employee
of a person subject to a credit rating of the nationally recognized
statistical rating organization or the issuer, underwriter, or sponsor
of a security or money market instrument subject to a credit rating of
the nationally recognized statistical rating organization was employed
by the nationally recognized statistical rating organization and
participated in any capacity in determining credit ratings for the
person or the securities or money market instruments during the 1-year
period preceding the date an action was taken with respect to the
credit rating, the nationally recognized statistical rating
organization shall--

(i) conduct a review to determine whether any conflicts of
interest of the employee influenced the credit rating; and

(ii) take action to revise the rating if appropriate, in
accordance with such rules as the Commission shall prescribe.

(B) REVIEW BY COMMISSION.--

(i) IN GENERAL.--The commission shall conduct periodic
reviews of the policies described in subparagraph (A) and the
implementation of the policies at each nationally recognized
statistical rating organization to ensure they are reasonably designed
and implemented to most effectively eliminate conflicts of interest.

(ii) TIMING OF REVIEWS.--The Commission shall review the
code of ethics and conflict of interest policy of each nationally
recognized statistical rating organization--

(I) not less frequently than annually; and

(II) whenever such policies are materially modified or amended.

(5) REPORT TO COMMISSION ON CERTAIN EMPLOYMENT
TRANSITIONS.--

(A) REPORT REQUIRED.--Each nationally recognized
statistical rating organization shall report to the Commission any case
such organization knows or can reasonably be expected to know where a
person associated with such organization within the previous 5 years
obtains employment with any obligor, issuer, underwriter, or sponsor of
a security or money market instrument for which the organization issued
a credit rating during the 12-month period prior to such employment, if
such employee--

(i) was a senior officer of such organization;

(ii) participated in any capacity in determining credit ratings
for such obligor, issuer, underwriter, or sponsor; or

(iii) supervised an employee described in clause (ii).

(B) PUBLIC DISCLOSURE.--Upon receiving such a report,
the Commission shall make such information publicly available.

(i) PROHIBITED CONDUCT.--

(1) PROHIBITED ACTS AND PRACTICES.--The Commission shall
issue final rules in accordance with subsection (n) to prohibit any act
or practice relating to the issuance of credit ratings by a nationally
recognized statistical rating organization that the Commission
determines to be unfair, coercive, or abusive, including any act or
practice relating to--

(A) conditioning or threatening to condition the issuance of a
credit rating on the purchase by the obligor or an affiliate thereof of
other services or products, including pre-credit rating assessment
products, of the nationally recognized statistical rating organization
or any person associated with such nationally recognized statistical
rating organization;

(B) lowering or threatening to lower a credit rating on, or
refusing to rate, securities or money market instruments issued by an
asset pool or as part of any asset-backed or mortgage-backed securities
transaction, unless a portion of the assets within such pool or part of
such transaction, as applicable, also is rated by the nationally
recognized statistical rating organization; or

(C) modifying or threatening to modify a credit rating or
otherwise departing from its adopted systematic procedures and
methodologies in determining credit ratings, based on whether the
obligor, or an affiliate of the obligor, purchases or will purchase the
credit rating or any other service or product of the nationally
recognized statistical rating organization or any person associated
with such organization.

(2) RULE OF CONSTRUCTION.--Nothing in paragraph (1), or
in any rules or regulations adopted thereunder, may be construed to
modify, impair, or supersede the operation of any of the antitrust laws
(as defined in the first section of the Clayton Act, except that
such
term includes
section 5 of the Federal Trade Commission Act, to the extent that such
section 5 applies to unfair methods of competition).

(j) DESIGNATION OF COMPLIANCE OFFICER.--

(1) IN GENERAL.--Each nationally recognized statistical
rating organization shall designate an individual responsible for
administering the policies and procedures that are required to be
established pursuant to subsections (g) and (h), and for ensuring
compliance with the securities laws and the rules and regulations
thereunder, including those promulgated by the Commission pursuant to
this section.

(2) LIMITATIONS.--

(A) IN GENERAL.--Except as provided in subparagraph (B),
an individual designated under paragraph (1) may not, while serving in
the designated capacity--

(i) perform credit ratings;

(ii) participate in the development of ratings methodologies or
models;

(iii) perform marketing or sales functions; or

(iv) participate in establishing compensation levels, other than
for employees working for that individual.

(B) EXCEPTION.--The Commission may exempt a small
nationally recognized statistical rating organization from the
limitations under this paragraph, if the Commission finds that
compliance with such limitations would impose an unreasonable burden on
the nationally recognized statistical rating organization.

(4) COMPENSATION.--The compensation of each compliance
officer appointed under paragraph (1) shall not be linked to the
financial performance of the nationally recognized statistical rating
organization and shall be arranged so as to ensure the independence of
the officer's judgment.

(5) ANNUAL REPORTS REQUIRED.--

(A) ANNUAL REPORTS REQUIRED.--Each individual designated
under paragraph (1) shall submit to the nationally recognized
statistical rating organization an annual report on the compliance of
the nationally recognized statistical rating organization with the
securities laws and the policies and procedures of the nationally
recognized statistical rating organization that includes--

(i) a description of any material changes to the code of ethics
and conflict of interest policies of the nationally recognized
statistical rating organization; and

(ii) a certification that the report is accurate and complete.

(B) SUBMISSION OF REPORTS TO THE COMMISSION.--Each
nationally recognized statistical rating organization shall file the
reports required under subparagraph (A) together with the financial
report that is required to be submitted to the Commission under this
section.

(k) STATEMENTS OF FINANCIAL CONDITION.--Each nationally
recognized statistical rating organization shall, on a confidential
basis, file with the Commission, at intervals determined by the
Commission, such financial statements, certified (if required by the
rules or regulations of the Commission) by an independent public
accountant, and information concerning its financial condition, as the
Commission, by rule, may prescribe as necessary or appropriate in the
public interest or for the protection of investors.

(l) SOLE METHOD OF REGISTRATION.--

(1) IN GENERAL.--On and after the effective date of this
section, a credit rating agency may only be registered as a nationally
recognized statistical rating organization for any purpose in
accordance with this section.

(2) PROHIBITION ON RELIANCE ON NO-ACTION RELIEF.--On and
after the effective date of this section--

(A) an entity that, before that date, received advice, approval,
or a no-action letter from the Commission or staff thereof to be
treated as a nationally recognized statistical
rating
organization pursuant to the Commission rule at section 240.15c3--1 of
title 17, Code of Federal Regulations, may represent itself or act as a
nationally recognized statistical rating organization only--

(i) during Commission consideration of the application, if such
entity has furnished an application for registration under this
section; and

(ii) on and after the date of approval of its application for
registration under this section; and

(B) the advice, approval, or no-action letter described in
subparagraph (A) shall be void.

(3) NOTICE TO OTHER AGENCIES.--Not later than 30 days
after the date of enactment of this section, the Commission shall give
notice of the actions undertaken pursuant to this section to each
Federal agency which employs in its rules and regulations the term
nationally recognized statistical rating organization' (as that term
is used under Commission rule 15c3--1 (17 C.F.R. 240.15c3--1), as in
effect on the date of enactment of this section).

(m) RULES OF CONSTRUCTION.--

(1) NO WAIVER OF RIGHTS, PRIVILEGES, OR
DEFENSES.--Registration under and compliance with this section does
not constitute a waiver of, or otherwise diminish, any right,
privilege, or defense that a nationally recognized statistical rating
organization may otherwise have under any provision of State or Federal
law, including any rule, regulation, or order thereunder.

(2) NO PRIVATE RIGHT OF ACTION.--Nothing in this section
may be construed as creating any private right of action, and no report
furnished by a nationally recognized statistical rating organization in
accordance with this section or section 17 shall create a private right
of action under section 18 or any other provision of law.

(n) REGULATIONS.--

(1) NEW PROVISIONS.--Such rules and regulations as are
required by this section or are otherwise necessary to carry out this
section, including the application form required under subsection (a)--

(A) shall be issued by the Commission in final form, not later
than 270 days after the date of enactment of this section; and

(B) shall become effective not later than 270 days after the date
of enactment of this section.

(2) REVIEW OF EXISTING REGULATIONS.--Not later than 270
days after the date of enactment of this section, the Commission
shall--

(A) review the existing rules and regulations which employ the
term nationally recognized statistical rating organization' or
NRSRO'; and

(B) amend or revise such rules and regulations in accordance with
the purposes of this section, as the Commission may prescribe as
necessary or appropriate in the public interest or for the protection
of investors.

(o) NRSROS SUBJECT TO COMMISSION AUTHORITY.--

(1) IN GENERAL.--No provision of the laws of any State
or political subdivision thereof requiring the registration, licensing,
or qualification as a credit rating agency or a nationally recognized
statistical rating organization shall apply to any nationally
recognized statistical rating organization or person employed by or
working under the control of a nationally recognized statistical rating
organization.

(2) LIMITATION.--Nothing in this subsection prohibits
the securities commission (or any agency or office performing like
functions) of any State from investigating and bringing an enforcement
action with respect to fraud or deceit against any nationally
recognized statistical rating organization or person associated with a
nationally recognized statistical rating organization.

(iii) to ensure that such ratings are not unduly influenced by
conflicts of interest.

(B) DIRECTOR OF THE OFFICE.--The head of the Office
shall be the Director, who shall report to the Chairman.

(2) STAFFING.--The Office established under this
subsection shall be staffed sufficiently to carry out fully the
requirements of this section. The staff shall include persons with
knowledge of and expertise in corporate, municipal, and structured debt
finance.

(v) the governance of the nationally recognized statistical
rating organization;

(vi) the activities of the individual designated by the
nationally recognized statistical rating organization under subsection
(j)(1);

(vii) the processing of complaints by the nationally recognized
statistical rating organization; and

(viii) the policies of the nationally recognized statistical
rating organization governing the postemployment activities of former
staff of the nationally recognized statistical rating organization.

(C) INSPECTION REPORTS.--The Commission shall make
available to the public, in an easily understandable format, an annual
report summarizing--

(i) the essential findings of all examinations conducted under
subparagraph (A), as deemed appropriate by the Commission;

(ii) the responses by the nationally recognized statistical
rating organizations to any material regulatory deficiencies identified
by the Commission under clause (i); and

(iii) whether the nationally recognized statistical rating
organizations have appropriately addressed the recommendations of the
Commission contained in previous reports under this subparagraph.

(4) RULEMAKING AUTHORITY.--The Commission shall--

(A) establish, by rule, fines, and other penalties applicable to
any nationally recognized statistical rating organization that violates
the requirements of this section and the rules thereunder; and

(B) issue such rules as may be necessary to carry out this
section.

(q) TRANSPARENCY OF RATINGS PERFORMANCE.--

(1) RULEMAKING REQUIRED.--The Commission shall, by rule,
require that each nationally recognized statistical rating organization
publicly disclose information on the initial credit ratings determined
by the nationally recognized statistical rating organization for each
type of obligor, security, and money market instrument, and any
subsequent changes to such credit ratings, for the purpose of allowing
users of credit ratings to evaluate the accuracy of ratings and compare
the performance of ratings by different nationally recognized
statistical rating organizations.

(2) CONTENT.--The rules of the Commission under this
subsection shall require, at a minimum, disclosures that--

(B) are clear and informative for investors having a wide range
of sophistication who use or might use credit ratings;

(C) include performance information over a range of years and for
a variety of types of credit ratings, including for credit ratings
withdrawn by the nationally recognized statistical rating organization;

(D) are published and made freely available by the nationally
recognized statistical rating organization, on an easily accessible
portion of its website, and in writing, when requested;

(E) are appropriate to the business model of a nationally
recognized statistical rating organization; and

(F) each nationally recognized statistical rating organization
include an attestation with any credit rating it issues affirming that
no part of the rating was influenced by any other business activities,
that the rating was based solely on the merits of the instruments being
rated, and that such rating was an independent evaluation of the risks
and merits of the instrument.

(r) CREDIT RATINGS METHODOLOGIES.--The Commission shall
prescribe rules, for the protection of investors and in the public
interest, with respect to the procedures and methodologies, including
qualitative and quantitative data and models, used by nationally
recognized statistical rating organizations that require each
nationally recognized statistical rating organization--

(1) to ensure that credit ratings are determined using procedures
and methodologies, including qualitative and quantitative data and
models, that are--

(A) approved by the board of the nationally recognized
statistical rating organization, a body performing a function similar
to that of a board; and

(B) in accordance with the policies and procedures of the
nationally recognized statistical rating organization for the
development and modification of credit rating procedures and
methodologies;

(2) to ensure that when material changes to credit rating
procedures and methodologies (including changes to qualitative and
quantitative data and models) are made, that--

(A) the changes are applied consistently to all credit ratings to
which the changed procedures and methodologies apply;

(B) to the extent that changes are made to credit rating
surveillance procedures and methodologies, the changes are applied to
then-current credit ratings by the nationally recognized statistical
rating organization within a reasonable time period determined by the
Commission, by rule; and

(C) the nationally recognized statistical rating organization
publicly discloses the reason for the change; and

(3) to notify users of credit ratings--

(A) of the version of a procedure or methodology, including the
qualitative methodology or quantitative inputs, used with respect to a
particular credit rating;

(B) when a material change is made to a procedure or methodology,
including to a qualitative model or quantitative inputs;

(C) when a significant error is identified in a procedure or
methodology, including a qualitative or quantitative model, that may
result in credit rating actions; and

(D) of the likelihood of a material change described in
subparagraph (B) resulting in a change in current credit ratings.

(1) FORM FOR DISCLOSURES.--The Commission shall require,
by rule, each nationally recognized statistical rating organization to
prescribe a form to accompany the publication of each credit rating
that discloses--

(A) information relating to--

(i) the assumptions underlying the credit rating procedures and
methodologies;

(ii) the data that was relied on to determine the credit rating;
and

(iii) if applicable, how the nationally recognized statistical
rating organization used servicer or remittance reports, and with what
frequency, to conduct surveillance of the credit rating; and

(B) information that can be used by investors and other users of
credit ratings to better understand credit ratings in each class of
credit rating issued by the nationally recognized statistical rating
organization.

(2) FORMAT.--The form developed under paragraph (1)
shall--

(A) be easy to use and helpful for users of credit ratings to
understand the information contained in the report;

(B) require the nationally recognized statistical rating
organization to provide the content described in paragraph (3)(B) in a
manner that is directly comparable across types of securities; and

(C) be made readily available to users of credit ratings, in
electronic or paper form, as the Commission may, by rule, determine.

(i) the credit ratings produced by the nationally recognized
statistical rating organization;

(ii) the main assumptions and principles used in constructing
procedures and methodologies, including qualitative methodologies and
quantitative inputs and assumptions about the correlation of defaults
across underlying assets used in rating structured products;

(iii) the potential limitations of the credit ratings, and the
types of risks excluded from the credit ratings that the nationally
recognized statistical rating organization does not comment on,
including liquidity, market, and other risks;

(iv) information on the uncertainty of the credit rating,
including--

(I) information on the reliability, accuracy, and quality of the
data relied on in determining the credit rating; and

(II) a statement relating to the extent to which data essential
to the determination of the credit rating were reliable or limited,
including--

(aa) any limits on the scope of historical data; and

(bb) any limits in accessibility to certain documents or other
types of information that would have better informed the credit rating;

(v) whether and to what extent third party due diligence services
have been used by the nationally recognized statistical rating
organization, a description of the information that such third party
reviewed in conducting due diligence services, and a description of the
findings or conclusions of such third party;

(vi) a description of the data about any obligor, issuer,
security, or money market instrument that were relied upon for the
purpose of determining the credit rating;

(vii) a statement containing an overall assessment of the quality
of information available and considered in producing a rating for an
obligor, security, or money market instrument, in relation to the
quality of information available to the nationally recognized
statistical rating organization in rating similar issuances;

(viii) information relating to conflicts of interest of the
nationally recognized statistical rating organization; and

(ix) such additional information as the Commission may require.

(B) QUANTITATIVE CONTENT.--Each nationally recognized
statistical rating organization shall disclose on the form developed
under this subsection--

(i) an explanation or measure of the potential volatility of the
credit rating, including--

(I) any factors that might lead to a change in the credit
ratings; and

(II) the magnitude of the change that a user can expect under
different market conditions;

(ii) information on the content of the rating, including--

(I) the historical performance of the rating; and

(II) the expected probability of default and the expected loss in
the event of default;

(iii) information on the sensitivity of the rating to assumptions
made by the nationally recognized statistical rating organization,
including--

(I) 5 assumptions made in the ratings process that, without
accounting for any other factor, would have the greatest impact on a
rating if the assumptions were proven false or inaccurate;
and

(II) an analysis, using specific examples, of how each of the 5
assumptions identified under subclause (I) impacts a rating;

(iv) such additional information as may be required by the
Commission.

(4) DUE DILIGENCE SERVICES FOR ASSET-BACKED
SECURITIES.--

(A) FINDINGS.--The issuer or underwriter of any
asset-backed security shall make publicly available the findings and
conclusions of any third-party due diligence report obtained by the
issuer or underwriter.

(B) CERTIFICATION REQUIRED.--In any case in which
third-party due diligence services are employed by a nationally
recognized statistical rating organization, an issuer, or an
underwriter, the person providing the due diligence services shall
provide to any nationally recognized statistical rating organization
that produces a rating to which such services relate, written
certification, as provided in subparagraph (C).

(C) FORMAT AND CONTENT.--The Commission shall establish
the appropriate format and content for the written certifications
required under subparagraph (B), to ensure that providers of due
diligence services have conducted a thorough review of data,
documentation, and other relevant information necessary for a
nationally recognized statistical rating organization to provide an
accurate rating.

(D) DISCLOSURE OF CERTIFICATION.--The Commission shall
adopt rules requiring a nationally recognized statistical rating
organization, at the time at which the nationally recognized
statistical rating organization produces a rating, to disclose the
certification described in subparagraph (B) to the public in a manner
that allows the public to determine the adequacy and level of due
diligence services provided by a third party.

(t) CORPORATE GOVERNANCE, ORGANIZATION, AND MANAGEMENT OF
CONFLICTS OF INTEREST.--

(A) IN GENERAL.--At least 1/2 of the board of directors,
but not fewer than 2 of the members thereof, shall be independent of
the nationally recognized statistical rating agency. A portion of the
independent directors shall include users of ratings from a nationally
recognized statistical rating organization.

(B) INDEPENDENCE DETERMINATION.--In order to be
considered independent for purposes of this subsection, a member of the
board of directors of a nationally recognized statistical rating
organization--

(i) may not, other than in his or her capacity as a member of the
board of directors or any committee thereof--

(I) accept any consulting, advisory, or other compensatory fee
from the nationally recognized statistical rating organization; or

(II) be a person associated with the nationally recognized
statistical rating organization or with any affiliated company thereof;
and

(ii) shall be disqualified from any deliberation involving a
specific rating in which the independent board member has a financial
interest in the outcome of the rating.

(C) COMPENSATION AND TERM.--The compensation of the
independent members of the board of directors of a nationally
recognized statistical rating organization shall not be linked to the
business performance of the nationally recognized statistical rating
organization, and shall be arranged so as to ensure the independence of
their judgment. The term of office of the independent directors shall
be for a pre-agreed fixed period, not to exceed 5 years, and shall not
be renewable.

(3) DUTIES OF BOARD OF DIRECTORS.--In addition to the
overall responsibilities of the board of directors, the board shall
oversee--

(A) the establishment, maintenance, and enforcement of policies
and procedures for determining credit ratings;

(B) the establishment, maintenance, and enforcement of policies
and procedures to address, manage, and disclose any conflicts of
interest;

(C) the effectiveness of the internal control system with respect
to policies and procedures for determining credit ratings;
and

(D) the compensation and promotion policies and practices of the
nationally recognized statistical rating organization.

(4) TREATMENT OF NRSRO SUBSIDIARIES.--If a nationally
recognized statistical rating organization is a subsidiary of a parent
entity, the board of the directors of the parent entity may satisfy the
requirements of this subsection by assigning to a committee of such
board of directors the duties under paragraph (3), if--

(A) at least 1/2 of the members of the committee (including the
chairperson of the committee) are independent, as defined in this
section; and

(B) at least 1 member of the committee is a user of ratings from
a nationally recognized statistical rating organization.

(5) EXCEPTION AUTHORITY.--If the Commission finds that
compliance with the provisions of this subsection present an
unreasonable burden on a small nationally recognized statistical rating
organization, the Commission may permit the nationally recognized
statistical rating organization to delegate such responsibilities to a
committee that includes at least one individual who is a user of
ratings of a nationally recognized statistical rating organization.

(1) SECURITY-BASED SWAP DEALERS.--It shall be unlawful
for any person to act as a security-based swap dealer unless the person
is registered as a security-based swap dealer with the Commission.

(2) MAJOR SECURITY-BASED SWAP PARTICIPANTS.--It shall be
unlawful for any person to act as a major security-based swap
participant unless the person is registered as a major security-based
swap participant with the Commission.

(b) REQUIREMENTS.--

(1) IN GENERAL.--A person shall register as a
security-based swap dealer or major security-based swap participant by
filing a registration application with the Commission.

(2) CONTENTS.--

(A) IN GENERAL.--The application shall be made in such
form and manner as prescribed by the Commission, and shall contain such
information, as the Commission considers necessary concerning the
business in which the applicant is or will be engaged.

(B) CONTINUAL REPORTING.--A person that is registered as
a security-based swap dealer or major security-based swap participant
shall continue to submit to the Commission reports that contain such
information pertaining to the business of the person as the Commission
may require.

(3) EXPIRATION.--Each registration under this section
shall expire at such time as the Commission may prescribe by rule or
regulation.

(4) RULES.--Except as provided in subsections (d) and
(e), the Commission may prescribe rules applicable to security-based
swap dealers and major security-based swap participants, including
rules that limit the activities of non-bank security-based swap dealers
and major security-based swap participants.

(5) TRANSITION.--Not later than 1 year after the date of
enactment of the Wall Street Transparency and Accountability Act of
2010, the Commission shall issue rules under this section to provide
for the registration of security-based swap dealers and major
security-based swap participants.

(6) STATUTORY DISQUALIFICATION.--Except to the extent
otherwise specifically provided by rule, regulation, or order of the
Commission, it shall be unlawful for a
security-based
swap dealer or a major security-based swap participant to permit any
person associated with a security-based swap dealer or a major
security-based swap participant who is subject to a statutory
disqualification to effect or be involved in effecting security-based
swaps on behalf of the security-based swap dealer or major
security-based swap participant, if the security-based swap dealer or
major security-based swap participant knew, or in the exercise of
reasonable care should have known, of the statutory disqualification.

(c) DUAL REGISTRATION.--

(1) SECURITY-BASED SWAP DEALER.--Any person that is
required to be registered as a security-based swap dealer under this
section shall register with the Commission, regardless of whether the
person also is registered with the Commodity Futures Trading Commission
as a swap dealer.

(2) MAJOR-SECURITY BASED SWAP PARTICIPANT.--Any person
that is required to be registered as a major security-based swap
participant under this section shall register with the Commission,
regardless of whether the person also is registered with the Commodity
Futures Trading Commission as a major swap participant.

(d) RULEMAKING.--

(1) IN GENERAL.--The Commission shall adopt rules for
persons that are registered as security-based swap dealers or major
security-based swap participants under this section.

(2) EXCEPTION FOR PRUDENTIAL REQUIREMENTS.--

(A) IN GENERAL.--The Commission may not prescribe rules
imposing prudential requirements on security-based swap dealers or
major security-based swap participants for which there is a prudential
regulator.

(B) APPLICABILITY.--Subparagraph (A) does not limit the
authority of the Commission to prescribe rules as directed under this
section.

(e) CAPITAL AND MARGIN REQUIREMENTS.--

(1) IN GENERAL.--

(A) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED
SWAP PARTICIPANTS THAT ARE BANKS.--Each registered security-based
swap dealer and major security-based swap participant for which there
is not a prudential regulator shall meet such minimum capital
requirements and minimum initial and variation margin requirements as
the prudential regulator shall by rule or regulation prescribe under
paragraph (2)(A).

(B) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED
SWAP PARTICIPANTS THAT ARE NOT BANKS.--Each registered
security-based swap dealer and major security-based swap participant
for which there is not a prudential regulator shall meet such minimum
capital requirements and minimum initial and variation margin
requirements as the Commission shall by rule or regulation prescribe
under paragraph (2)(B).

(2) RULES.--

(A) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED
SWAP PARTICIPANTS THAT ARE BANKS.--The prudential regulators, in
consultation with the Commission and the Commodity Futures Trading
Commission, shall adopt rules for security-based swap dealers and major
security- based swap participants, with respect to their activities as
a swap dealer or major swap participant, for which there is a
prudential regulator imposing--

(i) capital requirements; and

(ii) both initial and variation margin requirements on all
security-based swaps that are not cleared by a registered clearing
agency.

(B) SECURITY-BASED SWAP DEALERS AND MAJOR SECURITY-BASED
SWAP PARTICIPANTS THAT ARE NOT BANKS.-- The Commission shall adopt
rules for security-based swap dealers and major security-based swap
participants, with respect to their activities as a swap dealer or
major swap participant, for which there is not a prudential regulator
imposing--

(i) capital requirements; and

(ii) both initial and variation margin requirements on all swaps
that are not cleared by a registered clearing agency.

(C) CAPITAL.--In setting capital requirements for a
person that is designated as a security-based swap dealer or a major
security-based swap participant for a single type or single class or
category of security-based swap or activities, the prudential regulator
and the Commission shall take into account the risks associated with
other types of security-based
swaps or classes
of security-based swaps or categories of security-based swaps engaged
in and the other activities conducted by that person that are not
otherwise subject to regulation applicable to that person by virtue of
the status of the person.

(3) STANDARDS FOR CAPITAL AND MARGIN.--

(A) IN GENERAL.--To offset the greater risk to the
security-based swap dealer or major security-based swap participant and
the financial system arising from the use of security-based swaps that
are not cleared, the requirements imposed under paragraph (2) shall --

(i) help ensure the safety and soundness of the security-based
swap dealer or major security-based swap participant; and

(ii) be appropriate for the risk associated with the non-cleared
security-based swaps held as a security- based swap dealer or major
security-based swap participant.

(B) RULE OF CONSTRUCTION.--

(i) IN GENERAL.--Nothing in this section shall limit, or
be construed to limit, the authority--

(I) of the Commission to set financial responsibility rules for a
broker or dealer registered pursuant to section 15(b) (except for
section 15(b)(11) thereof) in accordance with section 15(c)(3); or

(II) of the Commodity Futures Trading Commission to set financial
responsibility rules for a futures commission merchant or introducing
broker registered pursuant to section 4f(a) of the Commodity Exchange
Act (except for section 4f(a)(3) thereof) in accordance with section
4f(b) of the Commodity Exchange Act.

(ii) FUTURES COMMISSION MERCHANTS AND OHTER DEALERS.--A
futures commission merchant, introducing broker, broker, or dealer
shall maintain sufficient capital to comply with the stricter of any
applicable capital requirements to which such futures commission
merchant, introducing broker, broker, or dealer is subject to under
this title or the Commodity Exchange Act.

(C) MARGIN REQUIREMENTS.--In prescribing margin
requirements under this subsection, the prudential regulator with
respect to security-based swap dealers and major security-based swap
participants that are depository institutions, and the Commission with
respect to security-based swap dealers and major security-based swap
participants that are not depository institutions shall permit the use
of noncash collateral, as the regulator or the Commission determines to
be consistent with--

(i) IN GENERAL.--The prudential regulators, the
Commission, and the Securities and Exchange Commission shall
periodically (but not less frequently than annually) consult on minimum
capital requirements and minimum initial and variation margin
requirements.

(ii) COMPARABILITY.--The entities described in clause
(i) shall, to the maximum extent practicable, establish and maintain
comparable minimum capital requirements and minimum initial and
variation margin requirements, including the use of noncash collateral,
for--

(A) shall make such reports as are required by the Commission, by
rule or regulation, regarding the transactions and positions and
financial condition of the registered security-based swap dealer or
major security-based swap participant;

(B)(i) for which there is a prudential regulator, shall keep
books and records of all activities related to the business as a
security-based swap dealer or major security-based swap participant in
such form and manner and for such period as may be prescribed by the
Commission by rule or regulation; and

(ii) for which there is no prudential regulator, shall keep books
and records in such form and manner and for such period as may be
prescribed by the Commission by rule or regulation; and

(C) shall keep books and records described in subparagraph (B)
open to inspection and examination by any representative of the
Commission.

(1) IN GENERAL.--Each registered security-based swap
dealer and major security-based swap participant shall maintain daily
trading records of the security-based swaps of the registered
security-based swap dealer and major security-based swap participant
and all related records (including related cash or forward
transactions) and recorded communications, including electronic mail,
instant messages, and recordings of telephone calls, for such period as
may be required by the Commission by rule or regulation.

(2) INFORMATION REQUIREMENTS.--The daily trading records
shall include such information as the Commission shall require by rule
or regulation.

(3) COUNTERPARTY RECORDS.--Each registered
security-based swap dealer and major security-based swap participant
shall maintain daily trading records for each counterparty in a manner
and form that is identifiable with each security-based swap
transaction.

(1) IN GENERAL.--Each registered security-based swap
dealer and major security-based swap participant shall conform with
such business conduct standards as prescribed in paragraph (3) and as
may be prescribed by the Commission by rule or regulation that relate
to--

(A) fraud, manipulation, and other abusive practices involving
security-based swaps (including security-based swaps that are offered
but not entered into);

(B) diligent supervision of the business of the registered
security-based swap dealer and major security-based swap participant;

(C) adherence to all applicable position limits; and

(D) such other matters as the Commission determines to be
appropriate.

(2) RESPONSIBILITIES WITH RESPECT TO SPECIAL ENTITIES.--

(A) ADVISING SPECIAL ENTITIES.--A security-based swap
dealer or major security-based swap participant that acts as an advisor
to special entity regarding a security-based swap shall comply with the
requirements of paragraph (4) with respect to such special entity.

(B) ENTERING OF SECURITY-BASED SWAPS WITH RESPECT TO SPECIAL
ENTITIES.--A security-based swap dealer that enters into or offers
to enter into security-based swap with a special entity shall comply
with the requirements of paragraph (5) with respect to such special
entity.

(C) SPECIAL ENTITY DEFINED.--For purposes of this
subsection, the term "special entity" means--

(i) a Federal agency;

(ii) a State, State agency, city, county, municipality, or other
political subdivision of a State or;

(iii) any employee benefit plan, as defined in section 3 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002);

(iv) any governmental plan, as defined in section 3 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1002); or

(v) any endowment, including an endowment that is an organization
described in section 501(c)(3) of the Internal Revenue Code of
1986.

(A) establish a duty for a security-based swap dealer or major
security-based swap participant to verify that any counterparty meets
the eligibility standards for an eligible contract participant;

(B) require disclosure by the security-based swap dealer or major
security-based swap participant to any counterparty to the transaction
(other than a security-based swap dealer, major security-based swap
participant, security-based swap dealer, or major security-based swap
participant) of--

(i) information about the material risks and characteristics of
the security-based swap;

(ii) any material incentives or conflicts of interest that the
security-based swap dealer or major security-based swap participant may
have in connection with the security-based swap; and

(iii)(I) for cleared security-based swaps, upon the request of
the counterparty, receipt of the daily mark of the transaction from the
appropriate derivatives clearing organization; and

(II) for uncleared security-based swaps, receipt of the daily
mark of the transaction from the security-based swap dealer or the
major security-based swap participant;

(C) establish a duty for a security-based swap dealer or major
security-based swap participant to communicate in a fair and balanced
manner based on principles of fair dealing and good faith; and

(D) establish such other standards and requirements as the
Commission may determine are appropriate in the public interest, for
the protection of investors, or otherwise in furtherance of the
purposes of this Act.

(A) IN GENERAL.--It shall be unlawful for a
security-based swap dealer or major security-based swap participant--

(i) to employ any device, scheme, or artifice to defraud any
special entity or prospective customer who is a special entity;

(ii) to engage in any transaction, practice, or course of
business that operates as a fraud or deceit on any special entity or
prospective customer who is a special entity; or

(iii) to engage in any act, practice, or course of business that
is fraudulent, deceptive, or manipulative.

(B) DUTY.--Any security-based swap dealer that acts as
an advisor to a special entity shall have a duty to act in the best
interests of the special entity.

(C) REASONABLE EFFORTS.--Any security-based swap dealer
that acts as an advisor to a special entity shall make reasonable
efforts to obtain such information as is necessary to make a reasonable
determination that any security-based swap recommended by the
security-based swap dealer is in the best interests of the special
entity, including information relating to--

(i) the financial status of the special entity;

(ii) the tax status of the special entity;

(iii) the investment or financing objectives of the special
entity; and

(iv) any other information that the Commission may prescribe by
rule or regulation.

(5) SPECIAL REQUIREMENTS FOR SECURITY-BASED SWAP DEALERS AS
COUNTERPARTIES TO SPECIAL ENTITIES.--

(A) IN GENERAL.--Any security-based swap dealer or major
security-based swap participant that offers to or enters into a
security-based swap with a special entity shall--

(i) comply with any duty established by the Commission for a
security-based swap dealer or major security-based swap participant,
with respect to a counterparty that is an eligible contract participant
within the meaning of subclause (I) or (II) of clause (vii) of section
1a(18) of the Commodity Exchange Act, that requires the security-based
swap dealer or major security-based swap participant to have a
reasonable basis to believe that the counterparty that is a special
entity has an independent representative that--

(I) has sufficient knowledge to evaluate the transaction and
risks;

(II) is not subject to a statutory disqualification;

(III) is independent of the security-based swap dealer or major
security-based swap participant;

(IV) undertakes a duty to act in the best interests of the
counterparty it represents;

(V) makes appropriate disclosures;

(VI) will provide written representations to the special entity
regarding fair pricing and the appropriateness of the transaction; and

(VII) in the case of employee benefit plans subject to the
Employee Retirement Income Security act of 1974, is a fiduciary as
defined in section 3 of that Act (29 U.S.C. 1002); and

(ii) before the initiation of the transaction, disclose to the
special entity in writing the capacity in which the security-based swap
dealer is acting.

(B) COMMISSION AUTHORITY.--The Commission may establish
such other standards and requirements under this paragraph as the
Commission may determine are appropriate in the public interest, for
the protection of investors, or otherwise in furtherance of the
purposes of this Act.

(7) APPLICABILITY.--This subsection shall not apply with
respect to a transaction that is--

(A) initiated by a special entity on an exchange or
security-based swaps execution facility; and

(B) the security-based swap dealer or major security-based swap
participant does not know the identity of the counterparty to the
transaction.

(i) DOCUMENTATION STANDARDS.--

(1) IN GENERAL.--Each registered security-based swap
dealer and major security-based swap participant shall conform with
such standards as may be prescribed by the Commission, by rule or
regulation, that relate to timely and accurate confirmation,
processing, netting, documentation, and valuation of all security-based
swaps.

(j) DUTIES.--Each registered security-based swap dealer
and major security-based swap participant shall, at all times, comply
with the following requirements:

(1) MONITORING OF TRADING.--The security-based swap
dealer or major security-based swap participant shall monitor its
trading in security-based swaps to prevent violations of applicable
position limits.

(2) RISK MANAGEMENT PROCEDURES.--The security-based swap
dealer or major security-based swap participant shall establish robust
and professional risk management systems adequate for managing the
day-to-day business of the security-based swap dealer or major
security-based swap participant.

(3) DISCLOSURE OF GENERAL INFORMATION.--The
security-based swap dealer or major security-based swap participant
shall disclose to the Commission and to the prudential regulator for
the security-based swap dealer or major security-based swap
participant, as applicable, information concerning--

(A) establish structural and institutional safeguards to ensure
that the activities of any person within the firm relating to research
or analysis of the price or market for any security-based swap or
acting in a role of providing clearing activities or making
determinations as to accepting clearing customers are separated by
appropriate informational partitions within the firm from the review,
pressure, or oversight of persons whose involvement in pricing,
trading, or clearing activities might potentially bias their judgment
or supervision and contravene the core principles of open access and
the business conduct standards described in this title; and

(B) address such other issues as the Commission determines to be
appropriate.

(6) ANTITRUST CONSIDERATIONS.--Unless necessary or
appropriate to achieve the purposes of this title, the security-based
swap dealer or major security-based swap participant shall not--

(A) adopt any process or take any action that results in any
unreasonable restraint of trade; or

(B) impose any material anticompetitive burden on trading or
clearing.

(1) IN GENERAL.--Each security-based swap dealer and
major security-based swap participant shall designate an individual to
serve as a chief compliance officer.

(2) DUTIES.--The chief compliance officer shall--

(A) report directly to the board or to the senior officer of the
security-based swap dealer or major security-based swap participant;

(B) review the compliance of the security-based swap dealer or
major security-based swap participant with respect to the
security-based swap dealer and major security- based swap participant
requirements described in this section;

(C) in consultation with the board of directors, a body
performing a function similar to the board, or the senior officer of
the organization, resolve any conflicts of interest that may arise;

(D) be responsible for administering each policy and procedure
that is required to be established pursuant to this section;

(E) ensure compliance with this title (including regulations)
relating to security-based swaps, including each rule prescribed by the
Commission under this section;

(F) establish procedures for the remediation of noncompliance
issues identified by the chief compliance officer through any--

(A) IN GENERAL.--In accordance with rules prescribed by
the Commission, the chief compliance officer shall annually prepare and
sign a report that contains a description of--

(i) the compliance of the security-based swap dealer or major
swap participant with respect to this title (including regulations);
and

(ii) each policy and procedure of the security-based swap dealer
or major security-based swap participant of the chief compliance
officer (including the code of ethics and conflict of interest
policies).

(B) REQUIREMENTS.--A compliance report under
subparagraph (A) shall--

(i) accompany each appropriate financial report of the
security-based swap dealer or major security-based swap participant
that is required to be furnished to the Commission pursuant to this
section; and

(ii) include a certification that, under penalty of law, the
compliance report is accurate and complete.

(l) ENFORCEMENT AND ADMINISTRATIVE PROCEEDING
AUTHORITY.--

(1) PRIMARY ENFORCEMENT AUTHORITY.--

(A) SECURITIES AND EXCHANGE COMMISSION.--Except as
provided in subparagraph (B), (C), or (D), the Commission shall have
primary authority to enforce subtitle B, and the amendments made by
subtitle B of the Wall Street Transparency and Accountability Act of
2010, with respect to any person.

(B) PRUDENTIAL REGULATORS.--The prudential regulators
shall have exclusive authority to enforce the provisions of subsection
(e) and other prudential requirements of this title (including risk
management standards), with respect to security-based swap dealers or
major security-based swap participants for which they are the
prudential regulator.

(C) REFERRAL.--

(i) VIOLATIONS OF NONPRUDENTIAL REQUIREMENTS.-- If the
appropriate Federal banking agency for security-based swap dealers or
major security-based swap participants that are depository institutions
has cause to believe that such security-based swap dealer or major
security-based swap participant may have engaged in conduct that
constitutes a violation of the nonprudential requirements of this
section or rules adopted by the Commission thereunder, the agency may
recommend in writing to the Commission that the Commission initiate an
enforcement proceeding as authorized under this title. The
recommendation shall be accompanied by a written explanation of the
concerns giving rise to the recommendation.

(ii) VIOLATIONS OF PRUDENTIAL REQUIREMENTS.--If the
Commission has cause to believe that a securities- based swap dealer or
major securities-based swap participant that has a prudential regulator
may have engaged in conduct that constitute a violation of the
prudential requirements of subsection (e) or rules adopted thereunder,
the Commission may recommend in writing to the prudential regulator
that the prudential regulator initiate an enforcement proceeding as
authorized under this title. The recommendation shall be accompanied by
a written explanation of the concerns giving rise to the
recommendation.

(D) BACKSTOP ENFORCEMENT AUTHORITY.--

(i) INITIATION OF ENFORCEMENT PROCEEDING BY PRUDENTIAL
REGULATOR.--If the Commission does not initiate an enforcement
proceeding before the end of the 90-day period beginning on the date on
which the Commission receives a written report under subsection (C)(i),
the prudential regulator may initiate an enforcement proceeding.

(ii) INITIATION OF ENFORCEMENT PROCEEDING BY
COMMISSION.--If the prudential regulator does not initiate an
enforcement proceeding before the end of the 90-day period beginning on
the date on which the prudential regulator receives a written report
under subsection (C)(ii), the Commission may initiate an enforcement
proceeding.

(2) CENSURE, DENIAL, SUSPENSION; NOTICE AND
HEARING.--The Commission, by order, shall censure, place
limitations on the activities, functions, or operations of, or revoke
the registration of any security-based swap dealer or major
security-based swap participant that has registered with the Commission
pursuant to subsection (b) if the Commission finds, on the record after
notice and opportunity for hearing, that such censure, placing of
limitations, or revocation is in the public interest and that such
security-based swap dealer or major security-based swap participant, or
any person associated with such security-based swap dealer or major
security-based swap participant effecting or involved in effecting
transactions in security-based swaps on behalf of such security-based
swap dealer or major security-based swap participant, whether prior or
subsequent to becoming so associated--

(A) has committed or omitted any act, or is subject to an order
or finding, enumerated in subparagraph (A), (D), or (E) of paragraph
(4) of section 15(b);

(B) has been convicted of any offense specified in subparagraph
(B) of such paragraph (4) within 10 years of the commencement of the
proceedings under this subsection;

(C) is enjoined from any action, conduct, or practice specified
in subparagraph (C) of such paragraph (4);

(D) is subject to an order or a final order specified in
subparagraph (F) or (H), respectively, of such paragraph (4); or

(E) has been found by a foreign financial regulatory authority to
have committed or omitted any act, or violated any foreign statute or
regulation, enumerated in subparagraph (G) of such paragraph (4).

(3) ASSOCIATED PERSONS.--With respect to any person who
is associated, who is seeking to become associated, or, at the time of
the alleged misconduct, who was associated or was seeking to become
associated with a security-based swap dealer or major security-based
swap participant for the purpose of effecting or being involved in
effecting security-based swaps on behalf of such security-based swap
dealer or major security-based swap participant, the Commission, by
order, shall censure, place limitations on the activities or functions
of such person, or suspend for a period not exceeding 12 months, or bar
such person from being associated with a security-based swap dealer or
major security-based swap participant, if the Commission finds, on the
record after notice and opportunity for a hearing, that such censure,
placing of limitations, suspension, or bar is in the public interest
and that such person--

(A) has committed or omitted any act, or is subject to an order
or finding, enumerated in subparagraph (A), (D), or (E) of paragraph
(4) of section 15(b);

(B) has been convicted of any offense specified in subparagraph
(B) of such paragraph (4) within 10 years of the commencement of the
proceedings under this subsection;

(C) is enjoined from any action, conduct, or practice specified
in subparagraph (C) of such paragraph (4);

(D) is subject to an order or a final order specified in
subparagraph (F) or (H), respectively, of such paragraph (4); or

(E) has been found by a foreign financial regulatory authority to
have committed or omitted any act, or violated any foreign statute or
regulation, enumerated in subparagraph (G) of such paragraph (4).

(4) UNLAWFUL CONDUCT.--It shall be unlawful--

(A) for any person as to whom an order under paragraph (3) is in
effect, without the consent of the Commission, willfully to become, or
to be, associated with a security- based swap dealer or major
security-based swap participant in contravention of such order; or

(B) for any security-based swap dealer or major security- based
swap participant to permit such a person, without the consent of the
Commission, to become or remain a person associated with the
security-based swap dealer or major security-based swap participant in
contravention of such order, if such security-based swap dealer or
major security-based swap participant knew, or in the exercise of
reasonable care should have known, of such order.

(1) the term "Federal banking agencies" means the Office of
the Comptroller of the Currency, the Board of Governors of the Federal
Reserve System, and the Federal Deposit Insurance Corporation;

(2) the term "insured depository institution" has the same
meaning as in section 3(c) of the Federal Deposit Insurance Act (12
U.S.C. 1813(c));

(3) the term "securitizer" means--

(A) an issuer of an asset-backed security; or

(B) a person who organizes and initiates an asset-backed
securities transaction by selling or transferring assets, either
directly or indirectly, including through an affiliate, to the issuer;
and

(4) the term "originator" means a person who--

(A) through the extension of credit or otherwise, creates a
financial asset that collateralizes an asset-backed security; and

(B) sells an asset directly or indirectly to a securitizer.

(b) REGULATIONS REQUIRED.--

(1) IN GENERAL.--Not later than 270 days after the date
of enactment of this section, the Federal banking agencies and the
Commission shall jointly prescribe regulations to require any
securitizer to retain an economic interest in a portion of the credit
risk for any asset that the securitizer, through the issuance of an
asset-backed security, transfers, sells, or conveys to a third party.

(2) RESIDENTIAL MORTGAGES.--Not later than 270 days
after the date of the enactment of this section, the Federal banking
agencies, the Commission, the Secretary of Housing and Urban
Development, and the Federal Housing Finance Agency, shall jointly
prescribe regulations to require any securitizer to retain an economic
interest in a portion of the credit risk for any residential mortgage
asset that the securitizer, through the issuance of an asset-backed
security, transfers, sells, or conveys to a third party.

(A) prohibit a securitizer from directly or indirectly hedging or
otherwise transferring the credit risk that the securitizer is required
to retain with respect to an asset;

(B) require a securitizer to retain--

(i) not less than 5 percent of the credit risk for any asset--

(I) that is not a qualified residential mortgage that is
transferred, sold, or conveyed through the issuance of an asset-backed
security by the securitizer; or

(II) that is a qualified residential mortgage that is
transferred, sold, or conveyed through the issuance of an asset-backed
security by the securitizer, if 1 or more of the assets that
collateralize the asset-backed security are not qualified residential
mortgages; or

(ii) less than 5 percent of the credit risk for an asset that is
not a qualified residential mortgage that is transferred, sold, or
conveyed through the issuance of an asset-backed security by the
securitizer, if the originator of the asset meets the underwriting
standards prescribed under paragraph (2)(B);

(C) specify--

(i) the permissible forms of risk retention for purposes of this
section;

(ii) the minimum duration of the risk retention required under
this section; and

(iii) that a securitizer is not required to retain any part of
the credit risk for an asset that is transferred, sold or conveyed
through the issuance of an asset-backed security by the securitizer, if
all of the assets that collateralize the asset-backed security are
qualified residential mortgages;

(D) apply, regardless of whether the securitizer is an insured
depository institution;

(E) with respect to a commercial mortgage, specify the
permissible types, forms, and amounts of risk retention that would meet
the requirements of subparagraph (B), which in the determination of the
Federal banking agencies and the Commission may include--

(i) retention of a specified amount or percentage of the total
credit risk of the asset;

(ii) retention of the first-loss position by a thirdparty
purchaser that specifically negotiates for the purchase of such first
loss position, holds adequate financial resources to back losses,
provides due diligence on all individual assets in the pool before the
issuance of the asset-backed securities, and meets the same standards
for risk retention as the Federal banking agencies and the Commission
require of the securitizer;

(iii) a determination by the Federal banking agencies and the
Commission that the underwriting standards and controls for the asset
are adequate; and

(iv) provision of adequate representations and warranties and
related enforcement mechanisms; and

(F) establish appropriate standards for retention of an economic
interest with respect to collateralized debt obligations, securities
collateralized by collateralized debt obligations, and similar
instruments collateralized by other asset-backed securities; and

(G) provide for--

(i) a total or partial exemption of any securitization, as may be
appropriate in the public interest and for the protection of investors;

(ii) a total or partial exemption for the securitization of an
asset issued or guaranteed by the United States, or an agency of the
United States, as the Federal banking agencies and the Commission
jointly determine appropriate in the public interest and for the
protection of investors, except that, for purposes of this clause, the
Federal National Mortgage Association and the Federal Home Loan
Mortgage Corporation are not agencies of the United States;

(iii) a total or partial exemption for any asset-backed security
that is a security issued or guaranteed by any State of the United
States, or by any political subdivision of a State or territory, or by
any public instrumentality of a State or territory that is exempt from
the registration requirements of the Securities Act of 1933 by reason
of section 3(a)(2) of that Act (15 U.S.C. 77c(a)(2)), or a security
defined as a qualified scholarship funding bond in section 150(d)(2) of
the Internal Revenue Code of 1986, as may be appropriate in the public
interest and for the protection of investors; and

(iv) the allocation of risk retention obligations between a
securitizer and an originator in the case of a securitizer that
purchases assets from an originator, as the Federal banking agencies
and the Commission jointly determine appropriate.

(2) ASSET CLASSES.--

(A) ASSET CLASSES.--The regulations prescribed under
subsection (b) shall establish asset classes with separate rules for
securitizers of different classes of assets, including residential
mortgages, commercial mortgages, commercial loans, auto loans, and any
other class of assets that the Federal banking agencies and the
Commission deem appropriate.

(B) CONTENTS.--For each asset class established under
subparagraph (A), the regulations prescribed under subsection (b) shall
include underwriting standards established by the Federal banking
agencies that specify the terms, conditions, and characteristics of a
loan within the asset class that indicate a low credit risk with
respect to the loan.

(d) ORIGINATORS.--In determining how to allocate risk
retention obligations between a securitizer and an originator under
subsection (c)(1)(E)(iv), the Federal banking agencies and the
Commission shall--

(1) reduce the percentage of risk retention obligations required
of the securitizer by the percentage of risk retention obligations
required of the originator; and

(2) consider--

(A) whether the assets sold to the securitizer have terms,
conditions, and characteristics that reflect low credit risk;

(B) whether the form or volume of transactions in securitization
markets creates incentives for imprudent origination of the type of
loan or asset to be sold to the securitizer; and

(C) the potential impact of the risk retention obligations on the
access of consumers and businesses to credit on reasonable terms, which
may not include the transfer of credit risk to a third party.

(e) EXEMPTIONS, EXCEPTIONS, AND ADJUSTMENTS.--

(1) IN GENERAL.--The Federal banking agencies and the
Commission may jointly adopt or issue exemptions, exceptions, or
adjustments to the rules issued under this section, including
exemptions, exceptions, or adjustments for classes of institutions or
assets relating to the risk retention requirement and the prohibition
on hedging under subsection (c)(1).

(2) APPLICABLE STANDARDS.--Any exemption, exception, or
adjustment adopted or issued by the Federal banking agencies and the
Commission under this paragraph shall--

(A) help ensure high quality underwriting standards for the
securitizers and originators of assets that are securitized or
available for securitization; and

(B) encourage appropriate risk management practices by the
securitizers and originators of assets, improve the access of consumers
and businesses to credit on reasonable terms, or otherwise be in the
public interest and for the protection of investors.

(3) CERTAIN INSTITUTIONS AND PROGRAMS EXEMPT.--

(A) FARM CREDIT SYSTEM INSTITUTIONS.--Notwithstanding
any other provision of this section, the requirements of this section
shall not apply to any loan or other financial asset made, insured,
guaranteed, or purchased by any institution that is subject to the
supervision of the Farm Credit Administration, including the Federal
Agricultural Mortgage Corporation.

(B) OTHER FEDERAL PROGRAMS.--This section shall not
apply to any residential, multifamily, or health care facility mortgage
loan asset, or securitization based directly or indirectly on such an
asset, which is insured or guaranteed by the United States or an agency
of the United States. For purposes of this subsection, the Federal
National Mortgage Association, the Federal Home Loan Mortgage
Corporation, and the Federal home loan banks shall not be considered an
agency of the United States.

(4) EXEMPTION FOR QUALIFIED RESIDENTIAL MORTGAGES.--

(A) IN GENERAL.--The Federal banking agencies, the
Commission, the Secretary of Housing and Urban Development, and the
Director of the Federal Housing Finance Agency shall jointly issue
regulations to exempt qualified residential mortgages from the risk
retention requirements of this subsection.

(B) QUALIFIED RESIDENTIAL MORTGAGE.--The Federal banking
agencies, the Commission, the Secretary of Housing and Urban
Development, and the Director of the Federal Housing Finance Agency
shall jointly define the term "qualified residential mortgage"
for purposes of this subsection, taking into consideration underwriting
and product features that historical loan performance data indicate
result in a lower risk of default, such as--

(i) documentation and verification of the financial resources
relied upon to qualify the mortgagor;

(ii) standards with respect to--

(I) the residual income of the mortgagor after all monthly
obligations;

(II) the ratio of the housing payments of the mortgagor to the
monthly income of the mortgagor;

(III) the ratio of total monthly installment payments of the
mortgagor to the income of the mortgagor;

(iii) mitigating the potential for payment shock on adjustable
rate mortgages through product features and underwriting standards;

(iv) mortgage guarantee insurance or other types of insurance or
credit enhancement obtained at the time of origination, to the extent
such insurance or credit enhancement reduces the risk of default; and

(v) prohibiting or restricting the use of balloon payments,
negative amortization, prepayment penalties, interest-only payments,
and other features that have been demonstrated to exhibit a higher risk
of borrower default.

(C) LIMITATION ON DEFINITION.--The Federal banking
agencies, the Commission, the Secretary of Housing and Urban
Development, and the Director of the Federal Housing Finance Agency in
defining the term "qualified residential mortgage", as required
by subparagraph (B), shall define that term to be no broader than the
definition "qualified mortgage" as the term is defined under
section 129C(c)(2) of the Truth in Lending Act, as amended by the
Consumer Financial Protection Act of 2010, and regulations adopted
thereunder.

(5) CONDITION FOR QUALIFIED RESIDENTIAL MORTGAGE
EXEMPTION.--The regulations issued under paragraph (4) shall
provide that an asset-backed security that is collateralized by
tranches of other asset-backed securities shall not be exempt from the
risk retention requirements of this subsection.

(6) CERTIFICATION.--The Commission shall require an
issuer to certify, for each issuance of an asset-backed security
collateralized exclusively by qualified residential mortgages, that the
issuer has evaluated the effectiveness of the internal supervisory
controls of the issuer with respect to the process for ensuring that
all assets that collateralize the asset-backed security are qualified
residential mortgages.

(1) the appropriate Federal banking agency, with respect to any
securitizer that is an insured depository institution; and

(2) the Commission, with respect to any securitizer that is not
an insured depository institution.

(g) AUTHORITY OF COMMISSION.--The authority of the
Commission under this section shall be in addition to the authority of
the Commission to otherwise enforce the securities laws.

(h) AUTHORITY TO COORDINATE ON RULEMAKING.--The
Chairperson of the Financial
Stability Oversight
Council shall coordinate all joint rulemaking required under this
section.

(i) EFFECTIVE DATE OF REGULATIONS.--The regulations issued
under this section shall become effective--

(1) with respect to securitizers and originators of asset-backed
securities backed by residential mortgages, 1 year after the date on
which final rules under this section are published in the Federal
Register; and

(2) with respect to securitizers and originators of all other
classes of asset-backed securities, 2 years after the date on which
final rules under this section are published in the Federal Register.

(1) DIRECTORS, OFFICERS, AND PRINCIPAL STOCKHOLDERS REQUIRED
TO FILE.--Every person who is directly or indirectly the beneficial
owner of more than 10 percent of any class of any equity security
(other than an exempted security) which is registered pursuant to
section 12, or who is a director or an officer of the issuer of such
security, shall file the statements required by this subsection with
the Commission.

(2) TIME OF FILING.--The statements required by this
subsection shall be filed--

(A) at the time of the registration of such security on a
national securities exchange or by the effective date of a registration
statement filed pursuant to section 12(g);

(B) within 10 days after he or she becomes such beneficial owner,
director, or officer or within such shorter time as the Commission may
establish by rule;

(C) if there has been a change in such ownership, or if such
person shall have purchased or sold a security-based swap agreement
involving such equity security, before the end of the second business
day following the day on which the subject transaction has been
executed, or at such other time as the Commission shall establish, by
rule, in any case in which the Commission determines that such 2--day
period is not feasible.

(3) CONTENTS OF STATEMENTS.--A statement filed--

(A) under subparagraph (A) or (B) of paragraph (2) shall contain
a statement of the amount of all equity securities of such issuer of
which the filing person is the beneficial owner; and

(B) under subparagraph (C) of such paragraph shall indicate
ownership by the filing person at the date of filing, any such changes
in such ownership, and such purchases and sales of the security-based
swap agreements or security-based swaps as have occurred since the most
recent such filing under such subparagraph.

(4) ELECTRONIC FILING AND AVAILABILITY.--Beginning not
later than 1 year after the date of enactment of the Sarbanes--Oxley
Act of 2002--

(B) the Commission shall provide each such statement on a
publicly accessible Internet site not later than the end of the
business day following that filing; and

(C) the issuer (if the issuer maintains a corporate website)
shall provide that statement on that corporate website, not later than
the end of the business day following that filing.

(b) For the purpose of preventing the unfair use of information
which may have been obtained by such beneficial owner, director, or
officer by reason of his relationship to the issuer, any profit
realized by him from any purchase and sale, or any sale and purchase,
of any equity security of such issuer (other than an exempted security)
or a security-based swap agreement involving any such equity security
within any period of less than six months, unless such security or
security-based swap agreement was acquired in good faith in connection
with a debt previously contracted, shall inure to and be recoverable by
the
issuer, irrespective
of any intention on the part of such beneficial owner, director, or
officer in entering into such transaction of holding the security or
security-based swap agreement purchased or of not repurchasing the
security or security-based swap agreement sold for a period exceeding
six months. Suit to recover such profit may be instituted at law or in
equity in any court of competent jurisdiction by the issuer, or by the
owner of any security of the issuer in the name and in behalf of the
issuer if the issuer shall fail or refuse to bring such suit within
sixty days after request or shall fail diligently to prosecute the same
thereafter; but no such suit shall be brought more than two years after
the date such profit was realized. This subsection shall not be
construed to cover any transaction where such beneficial owner was not
such both at the time of the purchase and sale, or the sale and
purchase, of the security or security-based swap agreement involved, or
any transaction or transactions which the Commission by rules and
regulations may exempt as not comprehended within the purpose of this
subsection.

(c) It shall be unlawful for any such beneficial owner, director,
or officer, directly or indirectly, to sell any equity security of such
issuer (other than an exempted security), if the person selling the
security or his principal (1) does not own the security sold, or (2) if
owning the security, does not deliver it against such sale within
twenty days thereafter, or does not within five days after such sale
deposit it in the mails or other usual channels of transportation; but
no person shall be deemed to have violated this subsection if he proves
that notwithstanding the exercise of good faith he was unable to make
such delivery or deposit within such time, or that to do so would cause
undue inconvenience or expense.

(d) The provisions of subsection (b) of this section shall not
apply to any purchase and sale, or sale and purchase, and the
provisions of subsection (c) of this section shall not apply to any
sale, of an equity security not then or theretofore held by him in an
investment account, by a dealer in the ordinary course of his business
and incident to the establishment or maintenance by him of a primary or
secondary market (otherwise than on a national securities exchange or
an exchange exempted from registration under section 5 of this title)
for such security. The Commission may, by such rules and regulations as
it deems necessary or appropriate in the public interest, define and
prescribe terms and conditions with respect to securities held in an
investment account and transactions made in the ordinary course of
business and incident to the establishment or maintenance of a primary
or secondary market.

(e) The provisions of this section shall not apply to foreign or
domestic arbitrage transaction unless made in contravention of such
rules and regulations as the Commission may adopt in order to carry out
the purpose of this section.

(f) TREATMENT OF TRANSACTIONS IN SECURITY FUTURES
PRODUCTS.--The provisions of this section shall apply to ownership
of and transactions in security futures products.

(g) The authority of the Commission under this section with respect
to security-based swap agreements shall be subject to the restrictions
and limitations of section 3A(b) of this title.

[Codified to 15 U.S.C. 78p]

[Source: Section 16 of the Act of June 6, 1934
(Pub. L. No. 291; 48 Stat. 896), effective October 1, 1934, as amended
by section 8 of the Act of August 20, 1964 (Pub. L. No. 88--467; 78
Stat. 579), effective August 20, 1964; section 208(b)(3) of title II
and 303(g) and (h) of title III of the Act of December 21, 2000
(Pub. L. No. 106--554; 114 Stat.2763A--435, 455 and 456,
respectively), effective December 21, 2000; section 403(a) of title IV
of the Act of July 30, 2002 (Pub. L. No. 107--204; 116 Stat. 788),
effective August 29, 2002; section 762(d)(5) of title VII of the Act of
July 21, 2010 (Pub. L. No. 111--203; 124 Stat. 1761), effective July
21, 2010; section 929R(b) of title IX of the Act of July 21, 2010
(Pub. L. No. 111--203; 124 Stat. 1867), effective July 21, 2010]

ACCOUNTS AND RECORDS, REPORTS, EXAMINATIONS OF EXCHANGES,
MEMBERS, AND OTHERS

SEC. 17 (a)(1) Every national exchange securities exchange, member
thereof, broker or dealer who transacts a business in securities
through the medium of any such member, registered securities
association, registered broker or dealer, registered municipal
securities dealer, municipal advisor registered securities information
processor, registered transfer agent, nationally recognized statistical
rating organization, and registered clearing agency and the Municipal
Securities Rulemaking Board shall make and keep for prescribed
periods
such records,
furnish such copies thereof, and make and disseminate such reports as
the Commission, by rule, prescribes as necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of this title. Any report that a nationally
recognized statistical rating organization is required by Commission
rules under this paragraph to make and disseminate to the Commission
shall be deemed furnished to the Commission.

(2) Every registered clearing agency shall also make and keep for
prescribed periods such records, furnish such copies thereof, and make
and disseminate such reports, as the appropriate regulatory agency for
such clearing agency, by rule, prescribes as necessary or appropriate
for the safeguarding of securities and funds in the custody or control
of such clearing agency or for which it is responsible.

(3) Every registered transfer agent shall make and keep for
prescribed periods such records, furnish such copies thereof, and make
such reports as the appropriate regulatory agency for such transfer
agent, by rule, prescribes as necessary or appropriate in furtherance
of the purposes of section 17A of this title.

(b) RECORDS SUBJECT TO EXAMINATION.--

(1) PROCEDURES FOR COOPERATION WITH OTHER AGENCIES.--All
records of persons described in subsection (a) of this section are
subject at any time, or from time to time, to such reasonable periodic,
special, or other examinations by representatives of the Commission and
the appropriate regulatory agency for such persons as the Commission or
the appropriate regulatory agency for such persons deems necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of this title: Provided,
however, That the Commission shall, prior to conducting any such
examination of a--

(A) registered clearing agency, registered transfer agent, or
registered municipal securities dealer for which it is not the
appropriate regulatory agency, give notice to the appropriate
regulatory agency for such clearing agency, transfer agent, or
municipal securities dealer of such proposed examination and consult
with such appropriate regulatory agency concerning the feasibility and
desirability of coordinating such examination with examinations
conducted by such appropriate regulatory agency with a view to avoiding
unnecessary regulatory duplication or undue regulatory burdens for such
clearing agency, transfer agent, or municipal securities dealer; or

(B) broker or dealer registered pursuant to section 15(b)(11),
exchange registered pursuant to section 6(g), or national securities
association registered pursuant to section 15A(k) give notice to the
Commodity Futures Trading Commission of such proposed examination and
consults with the Commodity Futures Trading Commission concerning the
feasibility and desirability of coordinating such examination with
examinations conducted by the Commodity Futures Trading Commission in
order to avoid unnecessary regulatory duplication or undue regulatory
burdens for such broker or dealer or exchange.

(2) FURNISHING DATA AND REPORTS TO CFTC.--The Commission
shall notify the Commodity Futures Trading Commission of any
examination conducted of any broker or dealer registered pursuant to
section 15(b)(11), exchange registered pursuant to section 6(g), or
national securities association registered pursuant to section 15A(k)
and, upon request, furnish to the Commodity Futures Trading Commission
any examination report and data supplied to, or prepared by, the
Commission in connection with such examination.

(3) USE OF CFTC REPORTS.--Prior to conducting an
examination under paragraph (1), the Commission shall use the reports
of examinations, if the information available therein is sufficient for
the purposes of the examination, of--

(A) any broker or dealer registered pursuant to section
15(b)(11);

(B) exchange registered pursuant to section 6(g); or

(C) national securities association registered pursuant to
section 15A(k); that is made by the Commodity Futures Trading
Commission, a national securities association registered pursuant to
section 15A(k), or an exchange registered pursuant to section 6(g).

(4) RULES OF CONSTRUCTION.--

(A) Notwithstanding any other provision of this subsection, the
records of a broker or dealer registered pursuant to section 15(b)(11),
an exchange registered pursuant to section 6(g), or a national
securities association registered pursuant to section 15A(k) described
in this subparagraph shall not be subject to routine periodic
examinations by the Commission.

(B) Any recordkeeping rules adopted under this subsection for a
broker or dealer registered pursuant to section 15(b)(11), an exchange
registered pursuant to section 6(g), or a national securities
association registered pursuant to section 15A(k) shall be limited to
records with respect to persons, accounts, agreements, contracts, and
transactions involving security futures products.

(C) Nothing in the proviso in paragraph (1) shall be construed to
impair or limit (other than by the requirement of prior consultation)
the power of the Commission under this subsection to examine any
clearing agency, transfer agent, or municipal securities dealer or to
affect in any way the power of the Commission under any other provision
of this title or otherwise to inspect, examine, or investigate any such
clearing agency, transfer agent, or municipal securities dealer.

(c)(1) Every clearing agency, transfer agent, and municipal
securities dealer for which the Commission is not the appropriate
regulatory agency shall (A) file with the appropriate regulatory agency
for such clearing agency, transfer agent, or municipal securities
dealer a copy of any application, notice, proposal, report, or document
filed with the Commission by reason of its being a clearing agency,
transfer agent, or municipal securities dealer and (B) file with the
Commission a copy of any application, notice, proposal, report, or
document filed with such appropriate regulatory agency by reason of its
being a clearing agency, transfer agent, or municipal securities
dealer. The Municipal Securities Rulemaking Board shall file with each
agency enumerated in section 3(a)(34)(A) of this title copies of every
proposed rule change filed with the Commission pursuant to section
19(b) of this title.

(2) The appropriate regulatory agency for a clearing agency,
transfer agent, or municipal securities dealer for which the Commission
is not the appropriate regulatory agency shall file with the Commission
notice of the commencement of any proceeding and a copy of any order
entered by such appropriate regulatory agency against any clearing
agency, transfer agent, municipal securities dealer, or person
associated with a transfer agent or municipal securities dealer, and
the Commission shall file with such appropriate regulatory agency, if
any, notice of the commencement of any proceeding and a copy of any
order entered by the Commission against the clearing agency, transfer
agent, or municipal securities dealer, or against any person associated
with a transfer agent or municipal securities dealer for which the
agency is the appropriate regulatory agency.

(3) The Commission and the appropriate regulatory agency for a
clearing agency, transfer agent, or municipal securities dealer for
which the Commission is not the appropriate regulatory agency shall
each notify the other and make a report of any examination conducted by
it of such clearing agency, transfer agent, or municipal securities
dealer, and, upon request, furnish to the other a copy of such report
and any data supplied to it in connection with such examination.

(4) The Commission or the appropriate regulatory agency may
specify that documents required to be filed pursuant to this subsection
with the Commission or such agency, respectively, may be retained by
the originating clearing agency, transfer agent, or municipal
securities dealer, or filed with another appropriate regulatory agency.
The Commission or the appropriate regulatory agency (as the case may
be) making such a specification shall continue to have access to the
document on request.

(d)(1) The Commission, by rule or order, as it deems necessary or
appropriate in the public interest and for the protection of investors,
to foster cooperation and coordination among self-regulatory
organization, or to remove impediments to and foster the development of
a national market system and national system for the clearance and
settlement of securities transactions, may--

(A) with respect to any person who is a member of or
participant in more than one self-regulatory organization, relieve any
such self-regulatory organization of any responsibility under this
title (i) to receive regulatory reports from such person, (ii) to
examine such person for compliance, or to enforce compliance by such
person with specified provisions of this title, the rules and
regulations thereunder, and its own rules, or (iii) to carry out other
specified regulatory functions with respect to such person,
and

(B) allocate among self-regulatory organizations the
authority to adopt rules with respect to matters as to which, in the
absences of such allocation, such self-regulatory organizations share
authority under this title.

In making any such rule or entering any such order, the Commission
shall take into consideration the regulatory capabilities and
procedures of the self-regulatory organizations, availability of staff,
convenience of location, unnecessary regulatory duplication, and such
other factors as the Commission may consider germane to the protection
of investors, cooperation and coordination among self-regulatory
organizations, and the development of a national market system and of a
national system for clearance and settlement of securities
transactions. The Commission, by rule or order, as it deems necessary
or appropriate in the public interest and for the protection of
investors, may require any self-regulatory organization relieved of any
responsibility pursuant to this paragraph, and any person with respect
to whom such responsibility relates, to take such steps as are
specified in any such rule or order to notify customers of, and persons
doing business with, such person of the limited nature of such
self-regulatory organization's responsibility for such person's acts,
practices, and course of business.

(2) A self-regulatory organization shall furnish copies of any
report of examination of any person who is a member of or a participant
in such self-regulatory organization to any other self-regulatory
organization of which such person is a member or in which such person
is a participant upon the request of such person, such other
self-regulatory organization, or the Commission.

(e)(1)(A) Every registered broker or dealer shall annually file
with the Commission a balance sheet and income statement certified by a
independent public accounting firm, or by a registered public
accounting firm if the firm is required to be registered under the
Sarbanes Oxley Act of 2002, prepared on a calendar or fiscal year
basis, and such other financial statements (which shall, as the
Commission specifies, be certified) and information concerning its
financial condition as the Commission, by rule may prescribe as
necessary or appropriate in the public interest or for the protection
of investors.

(B) Every registered broker and dealer shall annually send to its
customers its certified balance sheet and such other financial
statements and information concerning its financial condition as the
Commission, by rule, may prescribe pursuant to subsection (a) of this
section.

(C) The Commission, by rule or order, may conditionally or
unconditionally exempt any registered broker or dealer, or class of
such brokers or dealers, from any provision of this paragraph if the
Commission determines that such exemption is consistent with the public
interest and the protection of investors.

(2) The Commission, by rule, as it deems necessary or appropriate
in the public interest or for the protection of investors, may
prescribe the form and content of financial statements filed pursuant
to this title and the accounting principles and accounting standards
used in their preparation.

(A) report to the Commission or other person designated by the
Commission and, in the case of securities issued pursuant to chapter 31
of title 31, United States Code, such information about securities that
are missing, lost, counterfeit, stolen, or cancelled, in such form and
within such time as the Commission, by rule, determines is necessary or
appropriate in the public interest or for the protection of investors;
such information shall be available on request for a reasonable fee, to
any such exchange, member, association, broker, dealer, municipal
securities dealer, transfer agent, clearing agency, participant, member
of the Federal Reserve System, or insured bank, and such other persons
as the Commission, by rule, designates; and

(B) make such inquiry with respect to information reported
pursuant to this subsection as the Commission by rule, prescribes as
necessary or appropriate in the public interest or for the protection
of investors, to determine whether securities in their custody
or
control, for which they are responsible, or in which they are effecting,
clearing, or settling a transaction have been reported as missing,
lost, counterfeit, stolen, cancelled, or reported in such other manner
as the Commission, by rule, may prescribe.

(2) Every member of a national securities exchange, broker,
dealer, registered transfer agent, registered clearing agency,
registered securities information processor, national securities
exchange, and national securities association, shall require that each
of its partners, directors, officers, and employees be fingerprinted
and shall submit such fingerprints, or cause the same to be submitted,
to the Attorney General of the United States for identification and
appropriate processing. The Commission, by rule, may exempt from the
provisions of this paragraph upon specified terms, conditions, and
periods, any class of partners, directors, officers, or employees of
any such member, broker, dealer, transfer agent, clearing agency,
securities information processor, national securities exchange, or
national securities association, if the Commission finds that such
action is not inconsistent with the public interest or the protection
of investors. Notwithstanding any other provision of law, in providing
identification and processing functions, the Attorney General shall
provide the Commission and self-regulatory organizations designated by
the Commission with access to all criminal history record information.

(3)(A) In order to carry out the authority under paragraph (1)
above, the Commission or its designee may enter into agreement with the
Attorney General to use the facilities of the National Crime
Information Center ("NCIC") to receive, store, and disseminate
information in regard to missing, lost, counterfeit, or stolen
securities and to permit direct inquiry access to NCIC's file on such
securities for the financial community.

(B) In order to carry out the authority under paragraph (1) of
this subsection, the Commission or its designee and the Secretary of
the Treasury shall enter into an agreement whereby the Commission or
its designee will receive, store, and disseminate information in the
possession, and which comes into the possession, of the Department of
the Treasury in regard to missing, lost, counterfeit, or stolen
securities.

(4) In regard to paragraphs (1), (2), and (3), above insofar as
such paragraphs apply to any bank or member of the Federal Reserve
System, the Commission may delegate its authority to:

(A) the Comptroller of the Currency as to national banks;

(B) the Federal Reserve Board in regard to any member of the
Federal Reserve System which is not a national bank; and

(C) the Federal Deposit Insurance Corporation for any State bank
which is insured by the Federal Deposit Insurance Corporation but which
is not a member of the Federal Reserve System.

(5) The Commission shall encourage the insurance industry to
require their insured to report expeditiously instances of missing,
lost, counterfeit, or stolen securities to the Commission or to such
other person as the Commission may, by rule, designate to receive such
information.

(g) Any broker, dealer, or other person extending credit who is
subject to the rules and regulations prescribed by the Board of
Governors of the Federal Reserve System pursuant to this title shall
make such reports to the Board as it may require as necessary or
appropriate to enable it to perform the functions conferred upon it by
this title. If any such broker, dealer, or other person shall fail to
make any such report or fail to furnish full information therein, or,
if in the judgment of the Board it is otherwise necessary, such broker,
dealer, or other person shall permit such inspections to be made by the
Board with respect to the business operations of such broker, dealer,
or other person as the Board may deem necessary to enable it to obtain
the required information.

(h) RISK ASSESSMENT FOR HOLDING COMPANY SYSTEMS.--

(1) OBLIGATIONS TO OBTAIN, MAINTAIN, AND REPORT
INFORMATION.--Every person who is (A) a registered broker or
dealer, or

(B) a registered municipal securities dealer for which the
Commission is the appropriate regulatory agency, shall obtain such
information and make and keep such records as the Commission by rule
prescribes concerning the registered person's policies, procedures, or
systems for monitoring and controlling financial and operational risks
to it resulting from the activities of any of its associated persons,
other than a natural person. Such records shall describe, in the
aggregate, each of the financial and securities
activities
conducted by, and
the customary sources of capital and funding of, those of its
associated persons whose business activities are reasonably likely to
have a material impact on the financial or operational condition of
such registered person, including its net capital, its liquidity, or
its ability to conduct or finance its operations. The Commission, by
rule, may require summary reports of such information to be filed with
the Commission no more frequently than quarterly.

(2) AUTHORITY TO REQUIRE ADDITIONAL INFORMATION.--If, as
a result of adverse market conditions or based on reports provided to
the Commission pursuant to paragraph (1) of this subsection or other
available information, the Commission reasonably concludes that it has
concerns regarding the financial or operational condition of (A) any
registered broker or dealer, or (B) any registered municipal securities
dealer, government securities broker, or government securities dealer
for which the Commission is the appropriate regulatory agency, the
Commission may require the registered person to make reports concerning
the financial and securities activities of any of such person's
associated persons, other than a natural person, whose business
activities are reasonably likely to have a material impact on the
financial or operational condition of such registered person. The
Commission, in requiring reports pursuant to this paragraph, shall
specify the information required, the period for which it is required,
the time and date on which the information must be furnished, and
whether the information is to be furnished directly to the Commission
or to a self-regulatory organization with primary responsibility for
examining the registered person's financial and operational condition.

(A) COOPERATION IN IMPLEMENTATION.--In developing and
implementing reporting requirements pursuant to paragraph (1) of this
subsection with respect to associated persons subject to examination by
or reporting requirements of a Federal banking agency, the Commission
shall consult with and consider the views of each such Federal banking
agency. If a Federal banking agency comments in writing on a proposed
rule of the Commission under this subsection that has been published
for comment, the Commission shall respond in writing to such written
comment before adopting the proposed rule. The Commission shall, at the
request of the Federal banking agency, publish such comment and
response in the Federal Register at the time of publishing the adopted
rule.

(B) USE OF BANKING AGENCY REPORTS.--A registered broker,
dealer, or municipal securities dealer shall be in compliance with any
recordkeeping or reporting requirement adopted pursuant to paragraph
(1) of this subsection concerning an associated person that is subject
to examination by or reporting requirements of a Federal banking agency
if such broker, dealer, or municipal securities dealer utilizes for
such recordkeeping or reporting requirement copies of reports filed by
the associated person with the Federal banking agency pursuant to
section 5211 of the Revised Statutes, section 9 of the Federal Reserve
Act, section 7(a) of the
Federal Deposit Insurance Act, section
10(b) of the Home Owners' Loan Act, or
section 8 of the Bank Holding
Company Act of 1956. The Commission may, however, by rule adopted
pursuant to paragraph (1), require any broker, dealer, or municipal
securities dealer filing such reports with the Commission to obtain,
maintain, or report supplemental information if the Commission makes an
explicit finding that such supplemental information is necessary to
inform the Commission regarding potential risks to such broker, dealer,
or municipal securities dealer. Prior to requiring any such
supplemental information, the Commission shall first request the
Federal banking agency to expand its reporting requirements to include
such information.

(C) PROCEDURE FOR REQUIRING ADDITIONAL
INFORMATION.--Prior to making a request pursuant to paragraph (2)
of this subsection for information with respect to an associated person
that is subject to examination by or reporting requirements of a
Federal banking agency, the Commission shall--

(i) notify such agency of the information required with respect
to such associated person; and

(ii) consult with such agency to determine whether the
information required is available from such agency and for other
purposes, unless the Commission determines that any delay resulting
from such consultation would be inconsistent with ensuring the
financial and operational condition of the broker, dealer, municipal
securities dealer, government securities broker, or government
securities dealer or the stability or integrity of the securities
markets.

(D) EXCLUSION FOR EXAMINATION REPORTS.--Nothing in this
subsection shall be construed to permit the Commission to require any
registered broker or dealer, or any registered municipal securities
dealer, government securities broker, or government securities dealer
for which the Commission is the appropriate regulatory agency, to
obtain, maintain, or furnish any examination report of any Federal
banking agency or any supervisory recommendations or analysis contained
therein.

(E) CONFIDENTIALITY OF INFORMATION PROVIDED.--No
information provided to or obtained by the Commission from any Federal
banking agency pursuant to a request by the Commission under
subparagraph (C) of this paragraph regarding any associated person
which is subject to examination by or reporting requirements of a
Federal banking agency may be disclosed to any other person (other than
a self-regulatory organization), without the prior written approval of
the Federal banking agency. Nothing in this subsection shall authorize
the Commission to withhold information from Congress, or prevent the
Commission from complying with a request for information from any other
Federal department or agency requesting the information for purposes
within the scope of its jurisdiction, or complying with an order of a
court of the United States in an action brought by the United States or
the Commission.

(F) NOTICE TO BANKING AGENCIES CONCERNING FINANCIAL AND
OPERATIONAL CONDITION CONCERNS.--The Commission shall notify the
Federal banking agency of any concerns of the Commission regarding
significant financial or operational risks resulting from the
activities of any registered broker or dealer, or any registered
municipal securities dealer, government securities broker, or
government securities dealer for which the Commission is the
appropriate regulatory agency, to any associated person thereof which
is subject to examination by or reporting requirements of the Federal
banking agency.

(G) DEFINITION.--For purposes of this paragraph, the
term Federal banking agency' shall have the same meaning as the term
"appropriate Federal bank agency" in section 3(q) of the Federal
Deposit Insurance Act (12 U.S.C.
1813(q)).

(4) EXEMPTIONS.--The Commission by rule or order may
exempt any person or class of persons, under such terms and conditions
and for such periods as the Commission shall provide in such rule or
order, from the provisions of this subsection, and the rules
thereunder. In granting such exemptions, the Commission shall consider,
among other factors--

(A) whether information of the type required under this
subsection is available from a supervisory agency (as defined in
section 1101(6) of the Right to Financial Privacy Act of 1978
(12 U.S.C. 3401(6))), a State
insurance commission or similar State agency, the Commodity Futures
Trading Commission, or a similar foreign regulator;

(B) the primary business of any associated person;

(C) the nature and extent of domestic or foreign regulation of
the associated person's activities;

(D) the nature and extent of the registered person's securities
activities; and

(E) with respect to the registered person and its associated
persons, on a consolidated basis, the amount and proportion of assets
devoted to, and revenues derived from, activities in the United States
securities markets.

(5) AUTHORITY TO LIMIT DISCLOSURE OF
INFORMATION.--Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any information required
to be reported under this subsection, or any information supplied to
the Commission by any domestic or foreign regulatory agency that
relates to the financial or operational condition of any associated
person of a registered broker, dealer, government securities broker,
government securities dealer, or municipal securities dealer. Nothing
in this subsection shall authorize the Commission to withhold
information from Congress, or
prevent the
Commission from complying with a request for information from any other
federal department or agency requesting the information for purposes
within the scope of its jurisdiction, or complying with an order of a
court of the United States in an action brought by the United States or
the Commission. For purposes of section
552 of title 5, United States Code, this subsection shall be
considered a statute described in subsection (b)(3)(B) of such section
552. In prescribing regulations to carry out the requirements of this
subsection, the Commission shall designate information described in or
obtained pursuant to subparagraph (B) or (C) of paragraph (3) of this
subsection as confidential information for purposes of
section 24(b)(2) of this title.

(i) AUTHORITY TO LIMIT DISCLOSURE OF
INFORMATION.--Notwithstanding any other provision of law, the
Commission shall not be compelled to disclose any information required
to be reported under subsection (h) or (i) or any information supplied
to the Commission by any domestic or foreign regulatory agency that
relates to the financial or operational condition of any associated
person of a broker or dealer, investment bank holding company, or any
affiliate of an investment bank holding company. Nothing in this
subsection shall authorize the Commission to withhold information from
Congress, or prevent the Commission from complying with a request for
information from any other Federal department or agency or any
self-regulatory organization requesting the information for purposes
within the scope of its jurisdiction, or complying with an order of a
court of the United States in an action brought by the United States or
the Commission. For purposes of section 552 of title 5, United States
Code, this subsection shall be considered a statute described in
subsection (b)(3)(B) of such section 552. In prescribing regulations to
carry out the requirements of this subsection, the Commission shall
designate information described in or obtained pursuant to
subparagraphs (A), (B), and (C) of subsection (i)(5) as confidential
information for purposes of section
24(b)(2) of this title.

(j) COORDINATION OF EXAMINING AUTHORITIES.--

(1) ELIMINATION OF DUPLICATION.--The Commission and the
examining authorities, through cooperation and coordination of
examination and oversight activities, shall eliminate any unnecessary
and burdensome duplication in the examination process.

(2) COORDINATION OF EXAMINATIONS.--The Commission and
the examining authorities shall share such information, including
reports of examinations, customer complaint information, and other
nonpublic regulatory information, as appropriate to foster a
coordinated approach to regulatory oversight of brokers and dealers
that are subject to examination by more than one examining authority.

(3) EXAMINATIONS FOR CAUSE.--At any time, any examining
authority may conduct an examination for cause of any broker or dealer
subject to its jurisdiction.

(4) CONFIDENTIALITY.--

(A) IN GENERAL.--Section 24 shall apply to the sharing
of information in accordance with this subsection. The Commission shall
take appropriate action under section 24(c) to ensure that such
information is not inappropriately disclosed.

(B) APPROPRIATE DISCLOSURE NOT PROHIBITED.--Nothing in
this paragraph authorizes the Commission or any examining authority to
withhold information from the Congress, or prevent the Commission or
any examining authority from complying with a request for information
from any other Federal department or agency requesting the information
for purposes within the scope of its jurisdiction, or complying with an
order of a court of the United States in an action brought by the
United States or the Commission.

(5) DEFINITION.--For purposes of this subsection, the
term "examining authority" means a self-regulatory organization
registered with the Commission under this title (other than a
registered clearing agency) with the authority to examine, inspect, or
otherwise oversee the activities of a registered broker or dealer.

NATIONAL SYSTEM FOR CLEARANCE AND SETTLEMENT OF SECURITIES
TRANSACTIONS

SEC. 17A (a)(1) The Congress finds that--

(A) The prompt and accurate clearance and settlement of
securities transactions, including the transfer of record ownership and
the safeguarding of securities and funds related thereto, are necessary
for the protection of investors and persons facilitating transactions
by and acting on behalf of investors.

(B) Inefficient procedures for clearance and settlement impose
unnecessary costs on investors and persons facilitating transactions by
and acting on behalf of investors.

(C) New data processing and communications techniques create the
opportunity for more efficient, effective, and safe procedures for
clearance and settlement.

(D) The linking of all clearance and settlement facilities and
the development of uniform standards and procedures for clearance and
settlement will reduce unnecessary costs and increase the protection of
investors and persons facilitating transactions by and acting on behalf
of investors.

(2)(A) The Commission is directed, therefore, having due regard
for the public interest, the protection of investors, the safeguarding
of securities and funds, and maintenance of fair competition among
brokers and dealers, clearing agencies, and transfer agents, to use its
authority under this title--

(i) to facilitate the establishment of a national system for the
prompt and accurate clearance and settlement of transactions in
securities (other than exempted securities); and

(ii) to facilitate the establishment of linked or coordinated
facilities for clearance and settlement of transactions in securities,
securities options, contracts of sale for future delivery and options
thereon, and commodity options;

in accordance with the findings and to carry out the objectives set
forth in paragraph (1) of this subsection.

(B) The Commission shall use its authority under this title to
assure equal regulation under this title of registered clearing
agencies and registered transfer agents. In carrying out its
responsibilities set forth in subparagraph (A)(ii) of this paragraph,
the Commission shall coordinate with the Commodity Futures Trading
Commission and consult with the Board of Governors of the Federal
Reserve System.

(b)(1) Except as otherwise provided in this section, it shall be
unlawful for any clearing agency, unless registered in accordance with
this subsection, directly or indirectly, to make use of the mails or
any means or instrumentality of interstate commerce to perform the
functions of a clearing agency with respect to any security (other than
an exempted
security). The
Commission, by rule or order, upon its own motion or upon application,
may conditionally or unconditionally exempt any clearing agency or
security or any class of clearing agencies or securities from any
provisions of this section or the rules or regulations thereunder, if
the Commission finds that such exemption is consistent with the public
interest, the protection of investors, and the purposes of this
section, including the prompt and accurate clearance and settlement of
securities transactions and the safeguarding of securities and funds. A
clearing agency or transfer agent shall not perform the functions of
both a clearing agency and a transfer agent unless such clearing agency
or transfer agent is registered in accordance with this subsection (c)
of this section.

(2) A clearing agency may be registered under the terms and
conditions hereinafter provided in this subsection and in accordance
with the provisions of section 19(a) of this title, by filing with the
Commission an application for registration in such form as the
Commission, by rule, may prescribe containing the rules of the clearing
agency and such other information and documents as the Commission, by
rule, may prescribe as necessary or appropriate in the public interest
or for the prompt and accurate clearance and settlement of securities
transactions.

(3) A clearing agency shall not be registered unless the
Commission determines that--

(A) Such clearing agency is so organized and has the capacity to
be able to facilitate the prompt and accurate clearance and settlement
of securities transactions and derivative agreements, contracts, and
transactions for which it is responsible, to safeguard securities and
funds in its custody or control or for which it is responsible, to
comply with the provisions of this title and the rules and regulations
thereunder, to enforce (subject to any rule or order of the Commission
pursuant to section 17(d) or
19(g)(2) of this title)
compliance by its participants with the rules of the clearing agency,
and to carry out the purposes of this section.

(B) Subject to the provisions of paragraph (4) of this
subsection, the rules of the clearing agency provide that any (i)
registered broker or dealer, (ii) other registered clearing agency,
(iii) registered investment company, (iv) bank, (v) insurance company,
or (vi) other person or class of persons as the Commission, by rule,
may from time to time designate as appropriate to the development of a
national system for the prompt and accurate clearance and settlement of
securities transactions may become a participant in such clearing
agency.

(C) The rules of the clearing agency assure a fair representation
of its shareholders (or members) and participants in the selection of
its directors and administration of its affairs. (The Commission may
determine that the representation of participants is fair if they are
afforded a reasonable opportunity to acquire voting stock of the
clearing agency, directly or indirectly, in reasonable proportion to
their use of such clearing agency.)

(D) The rules of the clearing agency provide for the equitable
allocation of reasonable dues, fees, and other charges among its
participants.

(E) The rules of the clearing agency do not impose any schedule
of prices, or fix rates or other fees, for services rendered by its
participants.

(F) The rules of the clearing agency are designed to promote the
prompt and accurate clearance and settlement of securities transactions
and, to the extent applicable, derivative agreements, contracts, and
transactions, to assure the safeguarding of securities and funds which
are in the custody or control of the clearing agency or for which it is
responsible, to foster cooperation and coordination with persons
engaged in the clearance and settlement of securities transactions, to
remove impediments to and perfect the mechanism of a national system
for the prompt and accurate clearance and settlement of securities
transactions, and, in general, to protect investors and the public
interest; and are not designed to permit unfair discrimination in the
admission of participants or among participants in the use of the
clearing agency, or to regulate by virtue of any authority conferred by
this title matters not related to the purposes of this section or the
administration of the clearing agency.

(G) The rules of the clearing agency provide that (subject to any
rule or order of the Commission pursuant to section 17(d) or 19(g)(2)
of this title) its participants shall be appropriately disciplined for
violation of any provision of the rules of the clearing agency by
expulsion, suspension, limitation of activities, functions, and
operations, fine, censure, or any other fitting sanction.

(H) The rules of the clearing agency are in accordance with the
provisions of paragraph (5) of this subsection, and, in general,
provide a fair procedure with respect to the disciplining of
participants, the denial of participation to any person seeking
participation therein, and the prohibition or limitation by the
clearing agency of any person with respect to access to services
offered by the clearing agency.

(I) The rules of the clearing agency do not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of this title.

(4)(A) A registered clearing agency may, and in cases in which
the Commission, by order, directs as appropriate in the public interest
shall, deny participation to any person subject to a statutory
disqualification. A registered clearing agency shall file notice with
the Commission not less than thirty days prior to admitting any person
to participation, if the clearing agency knew, or in the exercise of
reasonable care should have known, that such person was subject to a
statutory disqualification. The notice shall be in such form and
contain such information as the Commission, by rule, may prescribe as
necessary or appropriate in the public interest or for the protection
of investors.

(B) A registered clearing agency may deny participation to, or
condition the participation of, any person if such person does not meet
such standards of financial responsibility, operational capability,
experience, and competence as are prescribed by the rules of the
clearing agency. A registered clearing agency may examine and verify
the qualifications of an applicant to be a participant in accordance
with procedures established by the rules of the clearing agency.

(5)(A) In any proceeding by a registered clearing agency to
determine whether a participant should be disciplined (other than a
summary proceeding pursuant to subparagraph (C) of this paragraph), the
clearing agency shall bring specific charges, notify such participant
of, and give him an opportunity to defend against such charges, and
keep a record. A determination by the clearing agency to impose a
disciplinary sanction shall be supported by a statement setting forth--

(i) any act or practice in which such participant has been found
to have engaged, or which such participant has been found to have
omitted;

(ii) the specific provisions of the rules of the clearing agency
which any such act or practice, or omission to act, is deemed to
violate; and

(iii) the sanction imposed and the reasons therefor.

(B) In any proceeding by a registered clearing agency to
determine whether a person shall be denied participation or prohibited
or limited with respect to access to services offered by the clearing
agency, the clearing agency shall notify such person of, and give him
an opportunity to be heard upon, the specific grounds for denial or
prohibition or limitation under consideration and keep a record. A
determination by the clearing agency to deny participation or prohibit
or limit a person with respect to access to services offered by the
clearing agency shall be supported by a statement setting forth the
specific grounds on which the denial or prohibition or limitation is
based.

(C) A registered clearing agency may summarily suspend and close
the accounts of a participant who (i) has been and is expelled or
suspended from any self-regulatory organization, (ii) is in default of
any delivery of funds or securities to the clearing agency, or (iii) is
in such financial or operating difficulty that the clearing agency
determines and so notifies the appropriate regulatory agency for such
participant that such suspension and closing of accounts are necessary
for the protection of the clearing agency, its participants, creditors,
or investors. A participant so summarily suspended shall be promptly
afforded an opportunity for a hearing by the clearing agency in
accordance with the provisions of subparagraph (A) of this paragraph.
The appropriate regulatory agency for such participant, by order, may
stay any such summary suspension on its own motion or upon application
by any person aggrieved thereby, if such appropriate regulatory agency
determines summarily or after notice and opportunity for hearing (which
hearing may consist solely of the submission of affidavits or
presentation of oral arguments) that such stay is consistent with the
public interest and protection of investors.

(6) No registered clearing agency shall prohibit or limit access
by any person to services offered by any participant therein.

(7)(A) A clearing agency that is regulated directly or indirectly
by the Commodity Futures Trading Commission through its association
with a designated contract market for
security futures
products that is a national securities exchange registered pursuant to
section 6(g), and that would be required to register pursuant to
paragraph (1) of this subsection only because it performs the functions
of a clearing agency with respect to security futures products effected
pursuant to the rules of the designated contract market with which such
agency is associated, is exempted from the provisions of this section
and the rules and regulations thereunder, except that if such a
clearing agency performs the functions of a clearing agency with
respect to a security futures product that is not cash settled, it must
have arrangements in place with a registered clearing agency to effect
the payment and delivery of the securities underlying the security
futures product.

(B) Any clearing agency that performs the functions of a clearing
agency with respect to security futures products must coordinate with
and develop fair and reasonable links with any and all other clearing
agencies that perform the functions of a clearing agency with respect
to security futures products, in order to permit, as of the compliance
date (as defined in section 6(h)(6)(C)), security futures products to
be purchased on one market and offset on another market that trades
such products.

(8) A registered clearing agency shall be permitted to provide
facilities for the clearance and settlement of any derivative
agreements, contracts, or transactions that are excluded from the
Commodity Exchange Act, subject to the requirements of this section and
to such rules and regulations as the Commission may prescribe as
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of this title.

(c)(1) Except as otherwise provided in this section, it shall be
unlawful for any transfer agent, unless registered in accordance with
this section, directly or indirectly, to make use of the mails or any
means of instrumentality of interstate commerce to perform the function
of a transfer agent with respect to any security registered under
section 12 of this title or
which would be required to be registered except for the exemption from
registration provided by subsection (g)(2)(B) or (g)(2)(G) of that
section. The appropriate regulatory agency, by rule or order, upon its
own motion or upon application, may conditionally or unconditionally
exempt any person or security or class of persons or securities from
any provision of this section or any rule or regulation prescribed
under this section, if the appropriate regulatory agency finds (A) that
such exemption is in the public interest and consistent with the
protection of investors and the purposes of this section, including the
prompt and accurate clearance and settlement of securities transactions
and the safeguarding of securities and funds, and (B) the Commission
does not object to such exemption.

(2) A transfer agent may be registered by filing with the
appropriate regulatory agency for such transfer agent an application
for registration in such form and containing such information and
documents concerning such transfer agent and any persons associated
with the transfer agent as such appropriate regulatory agency may
prescribe as necessary or appropriate in furtherance of the purposes of
this section. Except as hereinafter provided, such registration shall
become effective 45 days after receipt of such application by such
appropriate regulatory agency or within such shorter period of time as
such appropriate regulatory agency may determine.

(3) The appropriate regulatory agency for a transfer agent, by
order, shall deny registration to, censure, place limitations on the
activities, functions, or operations of, suspend for a period not
exceeding 12 months, or revoke the registration of such transfer agent,
if such appropriate regulatory agency finds, on the record after notice
and opportunity for hearing, that such denial, censure placing of
limitations, suspension, or revocation is in the public interest and
that such transfer agent, whether prior or subsequent to becoming such,
or any person associated with such transfer agent, whether prior or
subsequent to becoming so associated--

(A) has committed or omitted any act or is subject to an order or
finding enumerated in subparagraph (A), (D), (E), (H), or (G) of
paragraph (4) of section 15(b)
of this title, has been convicted of any offense specified in
subparagraph (B) of such paragraph (4) within ten years of the
commencement of the proceedings under this paragraph, or is enjoined
from any action, conduct, or practice specified in subparagraph (C) of
such paragraph (4); or

(B) is subject to an order entered pursuant to subparagraph (C)
of paragraph (4) of this subsection barring or suspending the right of
such person to be associated with a transfer agent.

(4)(A) Pending final determination whether any registration by a
transfer agent under this subsection shall be denied, the
appropriate regulatory agency for such transfer agent, by order, may
postpone the effective date of such registration for a period not to
exceed fifteen days, but if, after notice and opportunity for hearing
(which may consist solely of affidavits and oral arguments), it shall
appear to such appropriate regulatory agency to be necessary or
appropriate in the public interest or for the protection of investors
to postpone the effective date of such registration until final
determination, such appropriate regulatory agency shall so order.
Pending final determination whether any registration under this
subsection shall be revoked, such appropriate regulatory agency, by
order, may suspend such registration, if such suspension appears to
such appropriate regulatory agency, after notice and opportunity for
hearing, to be necessary or appropriate in the public interest or for
the protection of investors.

(B) A registered transfer agent may, upon such terms and
conditions as the appropriate regulatory agency for such transfer agent
deems necessary or appropriate in the public interest, for the
protection of investors, or in furtherance of the purposes of this
section, withdraw from registration by filing a written notice of
withdrawal with such appropriate regulatory agency. If such appropriate
regulatory agency finds that any transfer agent for which it is the
appropriate regulatory agency, is no longer in existence or has ceased
to do business as a transfer agent, such appropriate regulatory agency,
by order, shall cancel or deny the registration.

(C) The appropriate regulatory agency for a transfer agent, by
order, shall censure or place limitations on the activities or
functions of any person associated, seeking to become associated, or,
at the time of the alleged misconduct, associated or seeking to become
associated with the transfer agent, or suspend for a period not
exceeding 12 months or bar any such person from being associated with
any transfer agent, broker, dealer, investment adviser, municipal
securities dealer, municipal advisor, or nationally recognized
statistical rating organization, if the appropriate regulatory agency
finds, on the record after notice and opportunity for hearing, that
such censure, placing of limitations, suspension, or bar is in the
public interest and that such person has committed or omitted any act
or is subject to an order or finding enumerated in subparagraph (A),
(D), (E), (H), or (G) paragraph (4) of section 15(b) of this title, has
been convicted of any offense specified in subparagraph (B) of such
paragraph (4) within ten years of the commencement of the proceedings
under this paragraph, or is enjoined from any action, conduct, or
practice specified in subparagraph (C) of such paragraph (4). It shall
be unlawful for any person as to whom such an order suspending or
barring him from being associated with a transfer agent is in effect
willfully to become, or to be, associated with a transfer agent without
the consent of the appropriate regulatory agency that entered the order
and the appropriate regulatory agency for that transfer agent. It shall
be unlawful for any transfer agent to permit such a person to become,
or remain, a person associated with it without the consent of such
appropriate regulatory agencies, if the transfer agent knew, or in the
exercise of reasonable care should have known, of such order. The
Commission may establish, by rule, procedures by which a transfer agent
reasonably can determine whether a person associated or seeking to
become associated with it is subject to any such order, and may
require, by rule, that any transfer agent comply with such procedures.

(d)(1) No registered clearing agency or registered transfer agent
shall, directly or indirectly, engage in any activity as clearing
agency or transfer agent in contravention of such rules and regulations
(A) as the Commission may prescribe as necessary or appropriate in the
public interest, for the protection of investors, or otherwise in
furtherance of the purposes of this title, or (B) as the appropriate
regulatory agency for such clearing agency or transfer agent may
prescribe as necessary or appropriate for the safeguarding of
securities and funds.

(2) With respect to any clearing agency or transfer agent for
which the Commission is not the appropriate regulatory agency, the
appropriate regulatory agency for such clearing agency or transfer may,
in accordance with section 8 of the Federal Deposit Insurance Act
(12 U.S.C. 1818), enforce
compliance by such clearing agency or transfer agent with
the
provisions of
this section, sections 17 and 19 of this title, and the rules and
regulations thereunder. For purposes of this preceding sentence, any
violation of any such provision shall constitute adequate basis for the
issuance of an order under section 8(b) or 8(c) of the Federal Deposit
Insurance Act, and the participants in any such clearing agency and the
persons doing business with any such transfer agent shall be deemed to
be "depositors" as that term is used in
section 8(c) of that Act.

(3)(A) With respect to any clearing agency or transfer agent for
which the Commission is not the appropriate regulatory agency, the
Commission and the appropriate regulatory agency for such clearing
agency or transfer agent shall consult and cooperate with each other,
and, as may be appropriate, with State banking authorities having
supervision over such clearing agency or transfer agent toward the end
that, to the maximum extent, practicable, their respective regulatory
responsibilities may be fulfilled and the rules and regulations
applicable to such clearing agency or transfer agent may be in accord
with both sound banking practices and a national system for the prompt
and accurate clearance and settlement of securities transactions. In
accordance with this objective--

(i) the Commission and such appropriate regulatory agency shall,
at least fifteen days prior to the issuance for public comment of any
proposed rule or regulation or adoption of any rule or regulation
concerning such clearing agency or transfer agent, consult and request
the views of the other; and

(ii) such appropriate regulatory agency shall assume primary
responsibility to examine and enforce compliance by such clearing
agency or transfer agent with the provisions of this section and
sections 17 and
19 of this title.

(B) Nothing in the preceding subparagraph or elsewhere in this
title shall be construed to impair or limit (other than by the
requirement of notification) the Commission's authority to make rules
under any provision of this title or to enforce compliance pursuant to
any transfer agent, or person associated with a transfer agent rules
and regulations thereunder.

(4) Nothing in this section shall be construed to impair the
authority of any State banking authority or other State or Federal
regulatory authority having jurisdiction over a person registered as a
clearing governing such person which are not inconsistent with this
title and the rules governing such person which are not inconsistent
with this title and the rules and regulations thereunder.

(5) A registered transfer agent may not, directly or indirectly,
engage in any activity in connection with the guarantee of a signature
of an endorser of a security, including the acceptance or rejection of
such guarantee, in contravention of such rules and regulations as the
Commission may prescribe as necessary or appropriate in the public
interest, for the protection of investors, to facilitate the equitable
treatment of financial institutions which issue such guarantees, or
otherwise in furtherance of the purposes of this title.

(e) The Commission shall use its authority under this title to end
the physical movement of securities certificates in connection with the
settlement among brokers and dealers of transactions in securities
consummated by means of the mails or any means or instrumentalities of
interstate commerce.

(f)(1) Notwithstanding any provision of State law, except as
provided in paragraph (3), if the Commission makes each of the findings
described in paragraph (2)(A), the Commission may adopt rules
concerning--

(A) the transfer of certificated or uncertificated securities
(other than government securities issued pursuant to chapter 31 of
title 31, United States Code, or securities otherwise processed within
a book-entry system operated by the Federal Reserve banks pursuant to a
Federal book-entry regulation) or limited interests (including security
interests) therein; and

(B) rights and obligations of purchasers, sellers, owners,
lenders, borrowers, and financial intermediaries (including brokers,
dealers, banks, and clearing agencies) involved in or affected by such
transfers, and the rights of third parties whose interests in such
securities devolve from such transfers.

(2)(A) The findings described in this paragraph are findings by
the Commission that--

(i) such rule is necessary or appropriate for the protection of
investors or in the public interest and is reasonably designed to
promote the prompt, accurate, and safe clearance and settlement of
securities transactions;

(ii) in the absence of a uniform rule, the safe and efficient
operation of the national system for clearance and settlement of
securities transactions will be, or is, substantially impeded; and

(iii) to the extent such rule will impair or diminish, directly
or indirectly, rights of persons specified in paragraph (1)(B) under
State law concerning transfers of securities (or limited interests
therein), the benefits of such rule outweigh such impairment or
diminution of rights.

(B) In making the findings described in subparagraph (A), the
Commission shall give consideration to the recommendations of the
Advisory Committee established under paragraph (4), and it shall
consult with and consider the views of the Secretary of the Treasury
and the Board of Governors of the Federal Reserve System. If the
Secretary of the Treasury objects, in writing, to any proposed rule of
the Commission on the basis of the Secretary's view on the issues
described in clauses (i), (ii), and (iii) of subparagraph (A), the
Commission shall consider all feasible alternatives to the proposed
rule, and it shall not adopt any such rule unless the Commission makes
an explicit finding that the rule is the most practicable method for
achieving safe and efficient operation of the national clearance and
settlement system.

(3) Any State may, prior to the expiration of 2 years after the
Commission adopts a rule under this subsection, enact a statute that
specifically refers to this subsection and the specific rule thereunder
and establishes, prospectively from the date of enactment of the State
statute, a provision that differs from that applicable under the
Commission's rule.

(4)(A) Within 90 days after the date of enactment of this
subsection, the Commission shall (and at such times thereafter as the
Commission may determine, the Commission may), after consultation with
the Secretary of the Treasury and the Board of Governors of the Federal
Reserve System, establish an advisory committee under the Federal
Advisory Committee act (5 U.S.C. App.). The Advisory Committee shall be
directed to consider and report to the Commission on such matters as
the Commission, after consultation with the Secretary of the Treasury
and the Board of Governors of the Federal Reserve System, determines,
including the areas, if any in which State commercial laws and related
Federal laws concerning the transfer of certificated or uncertificated
securities, limited interests (including security interests) in such
securities, or the creation or perfection of security interests in such
securities do not provide the necessary certainty, uniformity, and
clarity for purchasers, sellers, owners, lenders, borrowers, and
financial intermediaries concerning their respective rights and
obligations.

(B) The Advisory Committee shall consist of 15 members, of
which--

(i) 11 shall be designated by the Commission in accordance with
the Federal Advisory Committee Act; and

(ii) 2 each shall be designated by the Board of Governors of the
Federal Reserve System and the Secretary of the Treasury.

(C) The Advisory Committee shall conduct its activities in
accordance with the Federal Advisory Committee Act. Within 6 months of
its designation, or such longer time as the Commission may designate,
the Advisory Committee shall issue a report to the Commission, and
shall cause copies of that report to be delivered to the Secretary of
the Treasury and the Chairman of the Board of Governors of the Federal
Reserve System.

(g) DUE DILIGENCE FOR THE DELIVERY OF DIVIDENDS, INTEREST, AND
OTHER VALUABLE PROPERTY RIGHTS.--

(1) REVISION OF RULES REQUIRED.--The Commission shall
revise its regulations in section 240.17Ad-17 of title 17, Code of
Federal Regulations, as in effect on December 8, 1997, to extend the
application of such section to brokers and dealers and to provide for
the following:

(A) A requirement that the paying agent provide a single written
notification to each missing security holder that the missing security
holder has been sent a check that has not yet been negotiated. The
written notification may be sent along with a check or other mailing
subsequently sent to the missing security holder but must be provided
no later than 7 months after the sending of the not yet negotiated
check.

(B) An exclusion for paying agents from the notification
requirements when the value of the not yet negotiated check is less
than $25.

(C) A provision clarifying that the requirements described in
subparagraph (A) shall have no effect on State escheatment laws.

(D) For purposes of such revised regulations-

(i) a security holder shall be considered a 'missing security
holder' if a check is sent to the security holder and the check is not
negotiated before the earlier of the paying agent sending the next
regularly scheduled check or the elapsing of 6 months after the sending
of the not yet negotiated check; and

(ii) the term paying agent' includes any issuer, transfer
agent, broker, dealer, investment adviser, indenture trustee,
custodian, or any other person that accepts payments from the issuer of
a security and distributes the payments to the holders of the security.

(2) RULEMAKING.--The Commission shall adopt such rules,
regulations, and orders necessary to implement this subsection no later
than 1 year after the date of enactment of this subsection. In
proposing such rules, the Commission shall seek to minimize disruptions
to current systems used by or on behalf of paying agents to process
payment to account holders and avoid requiring multiple paying agents
to send written notification to a missing security holder regarding the
same not yet negotiated check.

(h) VOLUNTARY REGISTRATION.--A person that clears
agreements, contracts, or transactions that are not required to be
cleared under this title may register with the Commission as a clearing
agency.

(i) STANDARDS FOR CLEARING AGENCIES CLEARING SECURITY-BASED
SWAP TRANSACTIONS.--To be registered and to maintain registration
as a clearing agency that clears security-based swap transactions, a
clearing agency shall comply with such standards as the Commission may
establish by rule. In establishing any such standards, and in the
exercise of its oversight of such a clearing agency pursuant to this
title, the Commission may conform such standards or oversight to
reflect evolving United States and international standards. Except
where the Commission determines otherwise by rule or regulation, a
clearing agency shall have reasonable discretion in establishing the
manner in which it complies with any such standards.

(j) RULES.--The Commission shall adopt rules governing
persons that are registered as clearing agencies for security-based
swaps under this title.

(k) EXEMPTIONS.--The Commission may exempt, conditionally
or unconditionally, a clearing agency from registration under this
section for the clearing of security-based swaps if the Commission
determines that the clearing agency is subject to comparable,
comprehensive supervision and regulation by the Commodity Futures
Trading Commission or the appropriate government authorities in the
home country of the agency. Such conditions may include, but are not
limited to, requiring that the clearing agency be available for
inspection by the Commission and make available all information
requested by the Commission.

(1) IN GENERAL.--A depository institution or derivative
clearing organization registered with the Commodity Futures Trading
Commission under the Commodity Exchange Act that is required to be
registered as a clearing agency under this section is deemed to be
registered under this section solely for the purpose of clearing
security-based swaps to the extent that, before the date of enactment
of this subsection--

(A) the depository institution cleared swaps as a multilateral
clearing organization; or

(B) the derivative clearing organization cleared swaps pursuant
to an exemption from registration as a clearing agency.

(2) CONVERSION OF DEPOSITORY INSTITUTIONS.--A depository
institution to which this subsection applies may, by the vote of the
shareholders owning not less than 51 percent of the voting interests of
the depository institution, be converted into a State corporation,
partnership, limited liability company, or similar legal form pursuant
to a plan of conversion, if the conversion is not in contravention of
applicable State law.

(3) SHARING OF INFORMATION.--The Commodity Futures
Trading Commission shall make available to the Commission, upon
request, all information determined to be relevant
by the Commodity
Futures Trading Commission regarding a derivatives clearing
organization deemed to be registered with the Commission under
paragraph (1).

(m) MODIFICATION OF CORE PRINCIPLES.--The Commission may
conform the core principles established in this section to reflect
evolving United States and international standards.

[Codified to 15 U.S.C. 78q--1]

[Source: Section 17A of the Act of June 6, 1934 (Pub. L.
No. 291), as added by section 15 of the Act of June 4, 1975 (Pub. L.
No. 94--29; 89 Stat. 141), effective June 4, 1975, except section
17A(b) and (c), effective December 1, 1975; as amended by section 322
of title III of the Act of December 4, 1987 (Pub. L. No. 100--181; 101
Stat. 1257), effective December 4, 1987; section 206 of title II of the
Act of October 15, 1990 (Pub. L. No. 101--429; 104 Stat. 941),
effective October 15, 1990; section 5 of the Act of October 16, 1990
(Pub. L. No. 101--432; 104 Stat. 973), effective October 16, 1990;
section 203(c)(1) of title II of the Act of November 15, 1990 (Pub. L.
No. 101--550; 104 Stat. 2718), effective November 15, 1990; section
206(d) and 207 of title II of the Act of December 21, 2000 (Pub. L.
No. 106--554; 114 Stat. 2763A--431), effective December 21, 2000;
section 604(c)(1)(C) of title VI of the Act of July 30, 2002 (Pub. L.
No. 107--204; 116 Stat. 796), effective July 30, 2002; section 763(b)
of title VII of the Act of July 21, 2010 (Pub. L. No. 111--203; 124
Stat. 1768--1769), effective July 21, 2010; sections 925(a)(3), and
929W of title IX of the Act of July 21, 2010 (Pub. L. No. 111--203;
124 Stat. 1851 and 1869), effective July 21, 2010]

AUTOMATED QUOTATION SYSTEMS FOR PENNY
STOCKS

SEC. 17B. (A) FINDINGS.--The Congress finds that--

(1) the market for penny stocks suffers from a lack of reliable
and accurate quotation and last sale information available to investors
and regulators;

(2) it is in the public interest and appropriate for the
protection of investors and the maintenance of fair and orderly markets
to improve significantly the information available to brokers, dealers,
investors, and regulators with respect to quotations for and
transactions in penny stocks; and

(3) a fully implemented automated quotation system for penny
stocks would meet the information needs of investors and market
participants and would add visibility and regulatory and surveillance
data to that market.

(b) MANDATE TO FACILITATE THE ESTABLISHMENT OF AUTOMATED
QUOTATION SYSTEMS.--

(1) IN GENERAL.--The Commission shall facilitate the
widespread dissemination of reliable and accurate last sale and
quotation information with respect to penny stocks in accordance with
the findings set forth in subsection (a), with a view toward
establishing, at the earliest feasible time, one or more automated
quotation systems that will collect and disseminate information
regarding all penny stocks.

(2) CHARACTERISTICS OF SYSTEMS.--Each such automated
quotation system shall--

(A) be operated by a registered securities association or a
national securities exchange in accordance with such rules as the
Commission and these entities shall prescribe;

(B) collect and disseminate quotation and transaction
information;

(C) except as provided in subsection (c), provide bid and ask
quotations of participating brokers or dealers, or comparably accurate
and reliable pricing information, which shall constitute firm bids or
offers for at least such minimum numbers of shares or minimum dollar
amounts as the Commission and the registered securities association or
national securities exchange shall require; and

(D) provide for the reporting of the volume of penny stock
transactions, including last sale reporting, when the volume reaches
appropriate levels that the Commission shall specify by rule or order.

(c) EXEMPTIVE AUTHORITY.--The Commission may, by rule or
order, grant such exemptions, in whole or in part, conditionally or
unconditionally, to any penny stock or class of penny stocks from the
requirements of subsection (b) as the Commission
determines to be
consistent with the public interest, the protection of investors, and
the maintenance of fair and orderly markets.

(d) COMMISSION REPORTING REQUIREMENTS.--The Commission
shall, in each of the first 5 annual reports (under
section 23(b)(1) of this title)
submitted more than 12 months after the date of enactment of this
section, include a description of the status of the penny stock
automated quotation system or systems required by subsection (b). Such
description shall include--

(1) a review of the development, implementation, and progress of
the project, including achievement of significant milestones and
current project schedule; and

(2) a review of the activities of registered securities
associations and national securities exchanges in the development of
the system.

[Codified to 15 U.S.C. 78q--2]

[Source: Section 17B of the Act of June 6, 1934 (Pub. L. No.
291), as added by section 506 of title V of the Act of October 15, 1990
(Pub. L. No. 101--429; 104 Stat. 955), effective October 15,
1990]